New York giants tackle the world

PR Week went to America to talk to some of the agency scene’s biggest players about their game plans for the next decade. Steve Bevan reports

PR Week went to America to talk to some of the agency scene’s biggest

players about their game plans for the next decade. Steve Bevan reports



Everyone has their pet theory about how the PR business is going to

develop over the next five or ten years. When it comes to the

consultancy business, there are a probably just a handful of global

players whose ideas will determine what that future will be.



Omnicom’s acquisition of Ketchum, Burson-Marsteller’s decision to

reorganise along practice lines, and a whole series of new ventures

designed to exploit the growth of the Internet are just a few of the

major developments of the last six months.



So what does the next year hold for the agency business? We went to the

world’s largest PR market, America, to ask 12 top agency executives some

tough questions.



Are we going to see more consolidation among the big PR agencies?



(HP) We’re not going anywhere. WPP is not a seller and Hill and Knowlton

is not going to break up. With all due respect I think this is a

question for Richard [Edelman] and John Graham and people like that to

decide whether they’re going to stay independent or not. PR acquisitions

[for us] would either be specific niche opportunities or associated with

an advertising agency - there’s not a large desire to go out and buy

another major agency.



(RE) The real question is how profitable are ad agencies and how

profitable do they expect their PR subsidiaries to be despite the fact

they are two different businesses. Edelman had a bad situation in London

for two years - I’m not sure if we were under ad agency ownership we

would have been able to stick with it.



(LC) Manning Selvage and Lee is working hard on acquisitions around the

world because we believe equity signals control to the client. In the

end the critical decision the client has to make is about seamless

performance and equity is at least a signal of that. We’re all aiming

for the same goal. For the larger firms, global is the name of the game



(BA) There’s probably not one road to success here. From Fleishman-

Hillard’s perspective there is going to be a lot more consolidation, but

also we anticipate the emergence of a lot of new agencies and that’s a

never-ending cycle.



How have the financial pressures changed?



(JH) Clients are demanding more value for money. In the early 1980s we

could do 75 cents worth of work per dollar and they were happy, the same

with law firms and accountants. Nowadays they expect dollars 1.50 for

that same dollar in that sense there is a lot more financial pressure

coming directly from the client.



(BB) The practical reality is that you don’t start the year with the

same volume of business that you used to, much more of it is project

driven.



(GA) Previously I think you could rely on a set of business

relationships that you knew would continue and endure - that’s all

gone.



(MK) I think there’s a balance between ability to invest and the right

profit margin for now. It’s given APCO a sense of security that we have

a parent company [GCI Group]. Having the ability to invest with some

level of security and having a business partner that has deep enough

pockets to believe in a vision is very important.



Are agencies investing in the future?



(DD) I think we’re getting significantly better at running businesses. I

think the advertising agencies have certainly taught us that.



(HP) The issue of running an agency well is different in different

markets because you’re selling different services and different levels

of sophistication. So you have very different cost structures in terms

of people, which is still our biggest cost by far. It’s the same thing

with real estate. What we’re finding in some markets is that we need

less real estate and more people of intellect and knowledge and

sophistication.



(KB) In the European market the inflexibility of the structure of labour

laws means that your business management practices have to be very good.

The answer to this is the virtual office scenario. But at the same time

we all recognise the need to be really good business managers with real

time information which means unbillable costs and hourly fees. The days

of looking at accounts at the end of the month are gone.



Is practice rather than geographical management the way ahead or is it

simply adding another layer of bureaucracy?



(JH) The practice is nothing more than a delivery mechanism for B-M’s

services - so it’s not replacing one bureaucracy with another. We still

have geographic structures, we still have people who are leaders in

those markets. More than anything, the practice structure has freed our

organisation up to bring whatever resources the client needs to bear

without the worry of geographical P&Ls and fiefdoms.



The client leader is now the most important person in our organisation.

It’s not so much a reflection of what the market is today as much as

what we’d like it to be. We know from experience if you can leverage

regional relationships and global relationships your ability to add

value to what you do for the client goes up and your ability to add

margin from that kind of business is immense.



(MK) If you can create a system where people are on the phone sharing

the best ideas I think that transcends whether one imposed structure

works better than another.



(MW) I think the tyranny of structure could kill the strongest agency

against a divergent client structure. The fact is that to the extent

that you’re successful, it usually means that you’ve been able to grow

and accommodate your style and your structure with the culture and

service of your client’s needs.



(BD) I think that the important thing from a structural point of view is

the people itself. If your people aren’t highly motivated and really

enthusiastic about the business, they’re not going to serve the client

well. That’s why I think the balance we are all looking for has to be

one of geography, balanced with an international practice because people

go to a location, they go to an office, they go some place where they

rub shoulders with other practice leaders.



How have clients needs changed?



(RE) In at least two areas - at the grass roots level, there used to be

massive operations in big companies in local markets, but they’ve taken

PR people out. Secondly in employee communications, they used to have

big internal departments to do employee communications now the agency

handles that part.



(KB) The outsourcing that’s happening with the downsized corporations is

very notable, particularly on a global basis.



(GA) When people ask me what business I’m in, I say I’m in the business

of helping companies solve problems where the company thinks

communications may be part of the solution. Sometimes it isn’t. The

ability we need to inculcate in our people is to analyse a business

problem, recognise where the solution doesn’t include communications.

Six months from now there may be a PR and communications aspect but

that’s going to come later. But what the client wants is somebody to

solve his or her problems. They don’t care whether you’re an advertising

person, a lawyer, a management consultant or a PR person.



(MW) I think that clients are overloading, I think they’re having a very

difficult time figuring out ‘should I have corporate image ads done by

my advertising agency or should I have it in the arena of the PR

counsellor?’ I think we have not done a very good job in distinguishing

in the minds of clients the various products and services we offer.



Are PR companies losing out to other disciplines in exploiting the

Internet?



(KB) Editorial imperatives give PR agencies a very strong edge. If you

treat a web site as a one-off where you want to go out and just get

somebody to set it up for you, there are a whole host of people who

could set that up but in terms of maintenance and providing regular

articles I think PR agencies are going to be very much present.



(MK) I think what ad agencies are doing and what we’re doing are two

almost totally different things because I think the design of a web site

is only one way that technology is going to affect our business. Other

things we’re looking at are applying artificial intelligence to crisis

management and interactive press conferences that allow you to use

keypad technology to have journalists respond. Web site is the buzz

phrase now because it’s what people see and it’s tangible but it goes

way beyond that.



(DD) Everybody on the Internet has control and everybody can deliver a

message. Our job - and I don’t think the ad agencies can figure it out

- our job has to be to figure out how you provide the control of this

and improve the information flow.



What’s the biggest challenge facing you?



(JH) I think its finding the sort of talented people that have all the

skills we’ve talked about. It really is a unique skill set when you

start to think about all the things we expect an individual to be able

to do. If you can’t find them, and this is usually the case, then you’re

having to train them and develop them. The amount of money we’re

spending on training these days is incredible.



(HP) Another issue is that the cost of competing for business has really

risen in proportion to the value of it because there are fewer ongoing,

permanent large relationships and more significant pieces of business

are competed for on the basis of the quality of the presentations and

the people you bring in from outside. You’re carrying all these costs,

so you can’t chase every dollar, you’ve got to make judgments about what

business you should pursue.



Is the reputation of PR improving?



(RE) I think in the last couple of years we’ve had a real setback, the

whole idea of spin doctors represents the worst part of politics getting

into the PR business. We ought to have some degree of standards and

feeling, not for who we represent, but how we represent them. When we’re

on TV and getting hammered, its not good for our industry, we don’t have

the same level of acceptance as the law or other professions, we’re

still at a delicate phase in getting accepted.



(DD) We have to focus on business people because we’ll never make the

world understand what we do so we should stop eating ourselves up over

it. It is not something that is ever going to be well understood or well

liked.



THE PLAYERS



From left to right standing:



(MW) Mark Weiss, CEO, Rowland US



(HP) Howard Paster, chairman and CEO, Hill and Knowlton



(BA) Bill Anderson, executive vice-president and senior partner

Fleishman-Hillard



(JM) John Margaritis, president and CEO, Ogilvy Adams and Rinehart



(RE) Richard Edelman, president and co-CEO, Edelman PR Worldwide



(DD) David Drobis, chairman and CEO, Ketchum PR



(BD) Bob Druckenmiller, president, Porter/Novelli



(KB) Kathy Bloomgarden, president, Ruder-Finn



(MK) Margery Kraus, president and CEO, APCO Associates



(GA) Gavin Anderson, chairman and CEO, Gavin Anderson and Company

From left to right sitting:



(LC) Lou Capozzi, executive vice-president/worldwide creative director

Manning Selvage and Lee



(BB) Betsy Buckley, executive vice-president, director business

development, Shandwick USA



(JH) Jeff Hunt, vice-chairman, client services worldwide, Burson-

Marsteller



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