Second, in what might be termed a contrarian investment, Ketchum purchased Chicago-based tech shop Corp. Technology Communications (CTC) in June.Kotcher says that acquisition had two main drivers: geography and human capital. "CTC really helped expand our operations in Chicago,
"And the firm's management team is incredible. They have developed some innovative ways of handling things like analyst relations.
CTC chief Paul Rand was appointed head of Ketchum's global technology practice.
"Paul is not just one of the smartest people in tech PR,
"He's one of the best minds in all of PR.
Third, Ketchum purchased New York-based Stromberg Consulting, which specializes in the fast-growing practices of workplace communications and change management.
Ketchum did not make any overseas acquisitions last year, but the agency insists it continues to look for opportunities. "It wasn't a conscious effort to avoid making a purchase aboard,
says Kotcher. "The opportunity just didn't present itself, but we are always looking for a strategic fit.
Nevertheless, 87% of Ketchum's 2001 global revenues came from within the US. Globally, the firm posted revenue of $185.22 million, up 10% from the previous year, which was good enough for seventh place on the global rankings.
The firm experienced a 22% staff turnover rate last year, which it says is down from recent years. Ketchum also had its share of layoffs, as its headcount was pared by about 8% by year's end, excluding acquisitions.
The firm also closed its office in Sacramento, CA. However, Kotcher says the economic slowdown was no reason to get caught standing still. "Despite the tight business conditions, we are still dedicated to investing in our people,
he says. "We may not be able to make every investment we'd like, but we continue to innovate and invest in the most cost-effective ways possible."
Kotcher's focus going forward remains on creating a company that's technologically linked despite its geographic sprawl. The firm also continues its commitment to its Ketchum Planning Process (KPP), which attempts to professionalize the way the agency works and ensure consistency across practices and borders.
Kotcher says the firm continues to invest in the system and has trained another 400 employees on it last year. He adds that KPP provides the firm with consistency in the service it provides as well as its overall approach.
"We're trying to offer clients a seamless and confident feel no matter where or when they interact with us,
5 EDELMAN PR WORLDWIDE - $152,385,810
Last spring, Richard Edelman was spotted sharing a meal with Publicis CEO Maurice Levy, again sparking speculation that the last of the major holdouts might be ready to give up its proudly held independence. Before long, conglomerates capable of considering deals were courting more modest shops, and the big question on Edelman - which hadn't been considering a sale, after all - shifted to how it would fare as it weathered the recession alone.
By year's end, the answer was clear. Edelman preserved its place among the country's largest agencies, repeating its 2000 agency ranking at number five. Its revenues, however, proved less stable. Worldwide billings fell $10 million; in the US, the bottom line slipped 9%, from $167 million to $152 million. Edelman, the firm's president and CEO, hopes fees will eventually be drawn evenly from US and foreign markets, and they've inched in that direction. In 2000, 30% of its revenue came from abroad. In 2001, it was 32% - an increase that could be accelerated with buys in Brazil, Spain and the Netherlands. However, numbers only reveal so much, and Edelman has a more complex diagnosis.
While he admits his business spent most of the year in a defensive stance - without the backing of a deep-pocketed owner, there were acquisition targets he could not pursue - Edelman says the agency's free-agent status provided valuable flexibility. Over the last 16 months, the agency suffered the loss of significant consumer accounts such as Absolut and Hyundai; silicon-centric offices in Boston and Austin, TX, were shuttered; and new-economy defections included Convergys, Global Crossing, Factiva, Verity and i2. However, in Edelman's opinion, the shakeout would have been worse had his strategic options been limited by a concern over share price.
"We believed there were going to be significant risks to existing client relationships if we cut staff in proportion to the decrease in our billings,
he says. "So we decided to accept lower margins.
At $142,018 for each US staffer, the firm's revenue-per-employee ratio stands much lower than that of its rivals - and that's after 22% turnover. Among the executives to leave last year was global tech practice leader Miller Bonner, who bolted to open a PR startup of his own. His replacement, Larry Sennet, lasted until March of this year, when the position was phased out.
According to Edelman, those losses were offset by an ability to aggressively pursue key recruits. "We can be nimble about who we bring in,
"Carlo Crighton, our new international tech leader, is a prime example. I didn't have to call Martin Sorrell and 13 other people at WPP and ask if there was room in the budget. We heard on a Wednesday that he was available, and by Tuesday he was hired.
Another key addition was Alison Canning, who took over as president of international operations after her London-based consultancy, First & 42nd, was absorbed in June.
One of First & 42nd's primary specialties is corporate social responsibility (CSR), a field in which Edelman hopes to emerge as an industry front-runner.
In the fall of 2000, the agency staked an early claim to that title by signing former Greenpeace communications director Jona-than Wootliff.
The investment may be yielding its first dividends: Some of Edelman's new clients - for example, Abbot Laboratories, Monsanto, The Gap and Michelin - have expressed interest.
"I'm sure we're not going to be the only ones active in this area,
says Edelman, who sees CSR as a specialty that can boost results industry-wide.
"We've been in this scrum - not only with ad agencies, but with consultants and lawyers - on everything from crisis management to brand positioning. In the future, CSR could enable us to get our fair share."
6 BURSON-MARSTELLER - $150,417,000
When Burson-Marsteller became the first big agency to announce layoffs in the dot-com era, CEO Chris Komisarjevsky described the 5% reduction as one made from "a position of strength.
Five months later, in April 2001, the firm lost Sun Microsystems, forcing him to order 20 more layoffs - and it became clear that his best efforts wouldn't be enough to halt the slide.
By year's end, Burson, once the world's largest PR firm, was no longer among the top five in the US, as domestic revenues fell almost 17.5%.
Though its overseas billings declined by a smaller percentage, the agency's total revenues of $259 million were not enough to keep it from losing fourth place on the global rankings to Incepta. "We felt the pressure already at the end of 2000,
says Komisarjevsky. "With the burst of the bubble and the broader economic environment, 2001 was a very, very difficult year."
Sun's decision to put its PR business up for review came as another high-profile client, Sprint, decided to reconsider its five-year relationship with the agency. Burson was able to preserve other marquee accounts, but not without making some concessions on fees. "Our 10 largest clients account for 23% of our worldwide revenues,
says Komisarjevsky. "Those are long-standing, multi-year relationships. We have a great deal of loyalty to those clients, and as they expand or retract, obviously so do we."
Burson's HR department had its own defections to deal with. Cynthia Hudson, who chaired the global public affairs practice, left to start a consultancy in Washington, DC. After Judi Mackey was lured from Edelman to helm the corporate/financial practice, the rival agency returned the favor by stealing 13-year veteran Alan VanderMolen from his post in Asia, Burson's best performing region. Mackey's division had other turnover problems, losing managing directors Steve Frankel - and then his replacement, Robert Grieves - to Abernathy MacGregor Group and the Bank of New York, respectively.
All of those personnel moves were overshadowed - at least from a publicity standpoint - when Greenpeace's Lord Peter Melchett came aboard to lead a corporate social responsibility group in London. But Burson didn't have to wait for the New Year to get some good news. SAP, Sony Electronics, Orbitz and Merrill Lynch's US private banking division were among the companies to sign with the agency in 2001. In the third quarter, Burson managed its only acquisition, offsetting the shuttering of sites in Hamburg and Warsaw by gobbling up Comminque, a PR outfit in Manchester, England.
Thanks to the four-year, $36 million public education campaign it inked with the Texas Public Utility Commission in 2000, US CEO Chet Burchett was also able to open a satellite in Austin, TX - where the tech-spending drought forced competitors to close up shop.
What made Komisarjevsky most proud, however, was a decision that does not show up on the balance sheet. "In spite of the fact that we had a decline in revenue, at no point did we do anything other than maintain our investment in thought leadership and the intellectual foundations of our business,
he says, referring to initiatives such as the studies it funded on online influencers and the reputation issues facing chief executives.
Recently, Burson packed some of its findings into a new product it calls CEO Navigator. Burchett would not name the companies that have opted for the service, but he did indicate that it has quickly proven a draw.
"Between the additional work we are doing for existing clients, and new clients that have come on board, there are millions of dollars in revenue that are attributable to our unique knowledge in this area,
"This year, I think we're beginning to reap the benefits of the focus we placed on the future during 2001."
7 PORTER NOVELLI - $116,764,000
Major moves among senior management was the big news at Porter Novelli. For starters, longtime CEO and founder Bob Druckenmiller segued into the role of chairman, leaving large shoes to be filled by David Copithorne, who joined PN in 1999 when Copithorne & Bellows was acquired to boost the firm's tech presence. Copithorne took over day-to-day operations last spring, but he didn't assume the official title of global chief executive until January of this year.
The succession was no surprise, and Druckenmiller's reputation as an industry savant with a congenial personality has been synonymous with the PN persona. Copithorne contends that the power shift was smooth, and insiders say it helped streamline a leadership structure that had been criticized as top-heavy.
Other changes included the promotions of Helen Ostrowski to president of the Americas, Neil Backwith to CEO of European operations and Gary Stockman to COO. The only hitch, according to Copithorne, was taking over the leadership reins "in a period of contraction in the industry," limiting PN from doing "as much as we wanted in terms of investments" and acquisitions.
In fact, PN only made one acquisition in 2001: Silicon Valley-based Tsantes & Associates, which specializes in convergence clients. Like much of the industry, PN was hit by the recession and forced to make layoffs, with the Bay Area impacted the hardest. Staff there fell from a high of about 70 to less than 50. Small offices in North Carolina and Arizona were closed, and a satellite office in Southern California's Irvine was "downsized.
European and Asian operations also weathered the recession, but they were not as deeply affected as the US. Singapore and China, however, saw "a lot of action
- something Copithorne expects will soon spread to Japan.
1 WEBER SHANDWICK WORLDWIDE - $283,084,398
The pink slips left PN with an agency turnover rate above 40%. "We did get lean and mean as an organization,
Much of the decline is attributed to the crash of the tech sector, where many PN clients "vaporized.
But Copithorne points to other trouble spots as well. He says the agency started off 2001 strong in public affairs, but saw the area shrink after September. The recession also prompted consumer accounts to wither, but had somewhat of a reverse effect on corporate business with a boost in areas such as litigation and crisis PR. He points to healthcare as a bright spot, especially with client Bristol-Meyers Squibb, and says the shop will focus on biotech and cause-related marketing in 2002. To bolster the latter, PN added former Ad Council president Ruth Wooden as head of public-private partnership initiatives.
Despite slimming down, PN saw some significant account wins, including Bell South (which keeps the agency's Atlanta office busy), the March of Dimes, the American Cancer Society and the Financial Times. Offices in Washington, DC, and Los Angeles also pitched a winning year, with LA performing steady work for clients such as McDonald's and Krispy Kreme. PN also "dramatically expanded
its business with Qualcomm. On the downside, however, long-time client Polaroid filed for Chapter 11 bankruptcy.
Copithorne's mandate for the future is to focus on integrated services and "leveraging relationships
with large clients to provide service in more than one area. He is quick to add that he is also committed to maintaining Druckenmiller's culture of "social marketing, a research-based orientation and integration.
"I've bought more of a new-economy focus to our marketing of services and pursuit of new clients,
he explains. "The plan is not to take off in a radical new direction, but to build on strengths. We try to say the more things change, the more they remain the same."
8 OGILVY PR WORLDWIDE - $94,904,500
It was a tough year at Ogilvy, as the technology implosion impacted the firm's bottom line and forced it to make significant staff reductions.
"The best thing about 2001 is that it was a long time ago,
says CEO Bob Seltzer. "We experienced two separate damaging events in 2001 - the aftermath of the dot-com implosion and a general economic slowdown compounded by Sept. 11.
Despite a drop in US revenue of 26% to $94.9 million from $129 million, the firm was able to jump one spot in the US agency rankings to place eighth. Indeed, Ogilvy lost much of its stable of dot-com clients, including WebMD. Nevertheless, Seltzer says his agency has turned its attention away from pure Internet plays and toward more old-line technology firms and its traditional bailiwick, healthcare. Following that tack, the agency did add some big accounts in 2001, including Dell Computer, Sun Microsystems, the National Institute of Allergy and Infectious Diseases, the National Institutes of Health and the United Way of America.
In response to the weak economic conditions of 2001, Ogilvy undertook some cost-containing initiatives, including the hiring of a procurement officer. In addition, the agency reduced its worldwide headcount by 27% - with most layoffs taking place in North America - and closed its tech-focused shop in Dallas.
The firm says such steps have led to a savings of more than $2 million in the past 12 months, just as business has started to pick up.
"Three thousand people do not wake up one morning with exactly the same feeling for their company,
acknowledges CEO Harris Diamond as he reflects on last year's merger of Weber Shandwick and BSMG. "But we do believe that our 3,000 people now understand what we're trying to achieve."
The agency's only US-based acquisition in 2001 was Sacramento, CA-based Deen & Black, which handles government social education and public affairs accounts. Seltzer says he considered Deen & Black a safe investment because the firm derives much of its revenue from long-term government contracts.
The Ogilvy chief adds that he consciously avoided making any other US-based acquisitions. "Most US firms didn't know what their business would be like in six weeks,
says Seltzer. "That's not an environment we like to make acquisitions in.
While healthcare continued to be a solid revenue driver for the firm, Seltzer says internal communications also remained strong throughout 2001. In addition, work in crisis communications was jump-started following the Sept. 11 terrorist attacks and the Enron debacle.
Regarding personnel changes, Ogilvy last year welcomed chief financial officer Jeff Herkowitz into the fold. Herkowitz joined the firm from Porter Novelli, where he served as chief operating officer. "Jeff's been a great fit,
says Seltzer. "I worked with him at Porter Novelli, so I knew the caliber of person we were getting."
Internationally, Ogilvy posted revenues of $146 million in 2001, representing a decline of 14% from the year before; however, the performance was still good enough to place 10th on our global rankings. The agency opened offices in the Middle East, Vietnam and Kenya, but its biggest move was in Australia, where it entered into a joint venture with communications concern The Singleton Group. That deal added a roster of five specialist firms under the Oglivy PR name. Ogilvy also entered into a joint venture in France last year.
Seltzer says he remains hopeful for 2002 despite the fact that competition for new business is as stiff as it has been in recent memory, with potential clients taking longer to make decisions on contracts. Nevertheless, Seltzer says he can see the sun beginning to overtake the economic storm clouds.
"We've received more RFPs in the last six weeks than we did in the last six months of 2001,
9 GCI GROUP/APCO ASSOCIATES - $85,434,598
Having opened six new offices around the world in 2000, APCO CEO Margery Kraus was ready to give her agency a breather in 2001. The plan, she says, was "to invest behind our strength and develop a global infrastructure.
Good thinking, given the economic year that was ahead.
Kraus is hesitant to speak of performance by sector - APCO lives by a strict "no walls
policy that's intended to defy any such classifications - but she points to litigation communication, corporate positioning and public affairs as last year's greatest successes. Unlike a number of DC firms that were pummeled by the events of Sept. 11, Kraus says APCO found itself well-positioned given its comfort at the intersection of public affairs and crisis work. In fact, staffers such as former National Transportation Safety Board Peter Goelz and former ambassador to Morocco Mark Ginsberg became regular fixtures on TV news networks, creating what Kraus calls "unfortunately, sort of a boom business."
Technology was the hardest hit, evidenced by APCO's only layoffs for the year: Twelve hi-tech clients walked out on the Seattle office in a single week, leading to the dismissal of approximately 15% of that office's workforce.
If that is true - that Diamond and his management team really do have the vast majority of Weber Shandwick's enormous staff singing the same song - then it might well be the most important internal communications work they've ever done, and certainly the absence of senior staff defections goes down as one of the agency's two key achievements in 2001.
APCO has always been known as a destination of choice for former members of Congress and post-political operatives, and the firm didn't disappoint in 2001. Former senator Don Riegle and his one-time chief of staff (and former president of Powell Tate) David Krawitz signed on, as did former Justice Department spokesperson Myron Marlin and Alixe Mattingly, formerly the director of communications for client Pharma. Despite a 10% turnover rate, SVP Mike Johnson was the only senior member to leave.
So far in 2002, APCO has restructured all of its North American offices into a single operating unit, putting the region in sync with the firm's global standard, and brought on significant new pieces of business, though Kraus was tight-lipped on specifics. She was also hesitant to expand on "plans for some growth
in 2002 - a New York office has allegedly been planned on and off for years - but what can you expect from an agency that's built its reputation on confidentiality?
The GCI Group, APCO's Grey Group sister agency, found success with the healthcare sector in 2001. Not surprisingly, technology was hard hit.
And though the firm didn't do as well managing the post-9/11 public affairs landscape as it's sibling, it did get an opportunity to do its part in the wake of tragedy - it jumped in to do crisis communications work for Lenox Hill Hospital following an employee's death by anthrax. Recall, a document-retrieval company retained GCI for counseling on its work with Cantor Fitzgerald.
The New York-based agency experienced a strong year in new business.
Major wins included Dell Computer, General Motors, Holiday Inn and Cap Gemini Ernst & Young. The only significant losses were the American Cancer Society and pharmaceutical firm AstraZeneca.
A number of mergers kept GCI going in 2001 as well. GCI Tunheim (Minneapolis), GCI Read Poland (Texas) and GCI Interactive (formerly Elemental Interactive) all became part of the GCI Group last year. Burson veteran Jeff Hunt came aboard as part of the Poland Read merger. GCI was forced to close its Boulder, CO office, but CEO Bob Feldman has high hopes for his Atlanta office's network for e-business and his corporate group in Minnesota, which services heavy-hitters such as superstore chain Target and the Minnesota Twins.
In 2002, GCI has already acquired Atlanta firm 360 Thinc, and Feldman has confirmed he's talking to San Francisco-based tech firm Wilson McHenry about joining forces.
10 GOLIN/HARRIS INTERNATIONAL - $81,897,283
Ask Golin/Harris International CEO Richard Jernstedt when he knew 2001 wasn't going to be an upbeat year and he answers quickly: "Not soon enough.
Indeed, the agency saw US revenues fall $26 million last year to just under $82 million, a 24% plunge.
The other is retaining the vast majority of the agency's clients. "Every single one of our clients received calls from a rival agency in the wake of the merger,
says Diamond. "But we explained to each of them the thinking behind bringing these firms together and we showed them the breadth of intellectual capital and global reach it would give us. Most importantly we made servicing our existing clients our number one priority."
The loss of IBM last fall was certainly a major reason for the decline, according to Jernstedt, and a slew of other hi-tech losses accounted for much of the rest. Despite the drop, Jernstedt remains upbeat about last year's performance. "Virtually everything we had hoped to do we made progress on,
he contends. "The major detractor was the technology arena specifically and the economy in general."
Golin absorbed TSI Communications' New York office after it lost IBM's $10 million business, and more than half of TSI's 110 employees were let go in the process. In fact, Golin cut staff throughout its network, with its headcount dropping from approximately 1,000 to 809 as 2001 ended, Jernstedt reports. The agency also decided to gut its CrossMedia operation in Chicago and New York. (CrossMedia was formed four years ago to do video production, web work and collateral design.) Overall, turnover for Golin last year was 60%, Jernstedt estimates. Taking out layoffs from that number left voluntary turnover at 25%, compared to about 33% in 2000 when more job-hopping was occurring in the strong economy. Voluntary turnover this year has been 9%, a reflection of the tight job market.
At Golin's Chicago headquarters, staff reductions reached all the way to the top - with agency president Dave Gilbert stepping aside in August.
Gilbert had long been seen as a key figure in Golin's work for DaimlerChrysler, which pared back last year. Looking back at the cuts, Jernstedt says, "It was painful to go through the decisions we had to in 2001.
On the upside, Golin was able to gain business in the auto sector to replace the loss of DaimlerChrysler, snaring Toyota.Other wins included marquee names such as Wrigley, Sprint and Hewlett-Packard. While technology was the agency's worst performing sector in 2001, consumer and healthcare PR were its best.
Golin began 2002 with a bang, acquiring Miami-based Nixon Group. With $4.2 million in revenues last year, Nixon is best known for its work in the anti-tobacco movement. Going forward, Golin plans on taking the former Nixon core and transforming it into a new social marketing practice.
Internationally, Golin continued to expand as it strove to make its name better known outside the United States. Worldwide revenue dropped $21 million, which means Golin actually gained business outside the US (given the fact that its domestic fees fell more than $26 million). The agency picked up BSMG offices in Dusseldorf and Hamburg, Germany. However, it's biggest international gains came in Hong Kong and Singapore, where it grabbed $3 million in revenues by taking over what had been Scotchbrook-BSMG.
Jernstedt conservatively predicts that revenues in 2002 will be flat compared to last year, despite the fact that new business has already been coming in. For example, Golin recently snagged a major assignment from the Cotton Council International and has gotten some work for Diet Coke. Internationally, it's picked up Hallmark in Hong Kong.
What's more, the firm has even started hiring again. In late April 2002, its staff count was 848 - 39 more than it had at the end of 2001. And Jernstedt isn't stopping there. He wants to build his New York office and continue expanding in Asia. "We're feeling pretty good,
he says. What a difference a year makes.
11 MS&L - $79,926,519
Chairman and CEO Lou Capozzi describes his agency's year as "healthy," and for good reason. MS&L's revenues fell just 1% and, he says, "We have our robust performance in healthcare to thank for that."
The firm did lose one major consumer account (Kodak went to Ketchum) as well as a host of smaller tech accounts, but overall management's strategy seems to have held up. "Mergers are difficult by definition," says Diamond.
Like most agencies, when MS&L did its forecasts in October 2000, it was hoping to reproduce the double-digit growth of previous years. "The turnaround of the market was a surprise to us, and therefore made things doubly difficult,
For the first time in its history, Capozzi says MS&L Europe's performance was stronger than in the US. Healthy activity in the Canadian business market with "major transactions and big deals in the banking industry
meant that the Toronto office, with its primarily corporate focus, also returned healthy numbers. Like most, however, the attacks of Sept. 11 quickly took its toll on MS&L's coffers. "They eliminated the news hole for two months,
Capozzi says, adding that the enforced four-day closure of the Washington, DC, office cost the agency $1 million.
Thank heavens, then, for healthcare, and particularly "the blockbusters - the engine that's driving that practice.
And the concentration of the area in the New York office meant that it, too, was relatively unscathed, according to Capozzi. What also helped was that the office didn't have too many tech clients - although the Boston and West Coast offices suffered because of this. Tech accounted for a lot of the shop's losses last year, which included Axient, Commtouch, Netlock Technologies, Mysmart.com and Randstad. IBM also disappeared in a consolidation, but for MS&L it meant a lot more for its cache than its billings.
The agency's major hire was in tech - Text 100's Virginia Cartwright came aboard to head the global technology practice. "We did something counter-cyclical,
Capozzi says, "hiring a global tech practice leader at the bottom of the slump. He's banking on that having been a "brilliant strategic move, to have a great star coming in at the bottom of the market and riding the crest of the wave into the future,
rather than what he laughingly doubts was "a terrible mistake."
While there were no new offices opened in 2001 and few acquisitions (an Italian firm and an interest in a Sao Paolo agency), the year began with a gift of 13 PR outfits (few were full-fledged "agencies") from Leo Burnett, MS&L's new sister ad agency. All of them were rebranded to become MS&L PR agencies.
MS&L's financial stability is analogous to the stability of its focus.
It didn't fling itself into new sectors, disciplines or regions. Capozzi replies "nope
to any questions of change or development, saying only that in 2002 he is "exploring the opportunities of our new relationship with Publicis.
In June, when the deal is ratified, the work will begin, he says.
Some 80% of MS&L's revenues come from the US, so Capozzi is excited about the involvement of Japan's Dentsu. (Multicultural marketing was already on the agenda last year, with Bcom3's formation of Pangea, described as a multicultural integrated marketing agency, for which MS&L will be the PR resource.) As for the merger, no one in the group will be pressed on possible consolidations, but there are some obvious synergies with its new siblings, especially in healthcare.
MS&L already started reaping the benefits of its extended family through its first full year's relationship with Bcom3 ad agency Leo Burnett. The two main examples were the US Army and the US Post Office. MS&L and Leo Burnett together pitched and won lucrative campaigns for these clients.
"That's one reason we're so excited about the Publicis deal,
Capozzi says, adding that "they're two agencies that are disproportionately strong internationally. Expanding our international footprint is number one on our agenda."
"But I think so far this one has worked. You'd like to give yourselves an A, but I think I'll go for B-plus at this stage. There's still work to be done."
12 RUDER FINN - $69,890,000
Ruder Finn attributes its two-place jump up the rankings table to setting modest and educated goals. "We got together in the final quarter of 2000 and saw where the economy was going and reorganized accordingly,
says Peter Finn, co-CEO with Kathy Bloomgarden. "We did not go into crisis mode.
Restructuring was one of the primary adjustments made last year. The agency officially became a two-part entity in June 2001 when it created RF Binder Partners. Although the two brands operate independently, the $69.8 million in total revenue for 2001 (down 8% from 2000) reflects the combined amounts for Ruder Finn and RF Binder Partners - which together make up the Ruder Finn Group.
By way of other adjustments, staff members were taken from tech practices and moved into healthcare and other areas that continued to prosper through the recession. With the exception of its Chicago office, the technology sector is definitively cited as the agency's area of demise for 2001.
Described as "cumulatively a lot,
Finn says the majority of the agency's lost business came from dot-com clientele - namely Women.com, Grassroots.com and E-Motion. Chicago's success is a result of the fact that it did not focus on the dot-com side of things. Paying attention primarily to the software and infrastructure elements, the Chicago office had its most successful year yet - going from $3 million in profits in 2000 to $3.5 million in 2001.
The agency also put great effort into its arts and communications sector.
"It is fascinating to see that during a downturn there are major corporations that are continually putting money into this area,
says Richard Funess, president of the Americas. "It has been a really good way for us to reach high-level corporate entities.
Ruder Finn began work in 2001 on a new music hall being built for the Los Angeles Philharmonic. The agency also acquired the Museum of Modern Art as a new account.
Other new business wins in 2001 included Pharmacia, Johnson & Johnson, Citibank Asia, Thomasville Furniture and Affymetrix. In 2002, the firm has already won assignments from Proctor & Gamble, GE Medical Systems, Bayer and Roche. It reports that its only losses of significance yet this year have been Ricoh, an office equipment supply company, and Drspock.com, a parenting website.
While employee cuts seemed inevitable in 2001, Ruder Finn is proud to report that it had less than 10% turnover among its full-time staff, and just 5% at the VP level and above. "We have always been below the industry average for turnover rate,
says CFO Anthony Esposito. "Financial independence is key. Because we set our own financial targets, we did not have to cut as deep.
The firm did suffer the loss of Paul McDade, MD of healthcare, who left for Hill & Knowlton, and Karen Berk, MD of the Los Angeles office, who chose to take a government position. But with the addition of Ken Rabin, EVP of healthcare policy in Washington, DC, and Montieth Illingworth, SVP of financial markets in New York, Ruder Finn intends to grow in 2002.
"The people we brought aboard in 2001 have made a huge difference,
says Esposito. "We are looking for more investment hires in 2002."
Heading into what most predict will be a much more profitable year than 2001, Ruder Finn's outlook is colored with a deserved confidence. Esposito verifies, "For budgeting purposes, we tend to be conservative. We say we expect 5% growth in 2002 because we want to deliver, but we are already ahead of that goal and we will come in above it by year's end."
Despite retaining most key clients, Weber Shandwick's revenues plunged.
13 INCEPTA GROUP - $68,392,291
For London-based Incepta Group, 2001 was a tale of two firms. After snatching up a pair of high-profile US-based agencies in 2000 - Cunningham Communications and Sard Verbinnen - Incepta, which houses the Citigate PR brand, saw US revenues fall 14%, from $79 million to $68 million, due in large part to the drop in tech PR.
"It was two very distinct stories last year,
says Incepta CEO Richard Nichols. "We saw strength in the financial and crisis practice at Sard Verbinnen but experienced some tough times at Cunningham because of the slowdown in technology - especially on the West Coast.
The continued impact of the hi-tech contraction has forced Nichols to remain cautious on the US in 2002. "We have budgeted for no revenue growth this year," he reports.
Still, Nichols insists that buying tech-focused Cunningham was something he would do all over again. "The firm has been through a very tough year as clients have cut spending across the board,
he says. "However, Cunningham is a best in brand name with a premier client list, so it remains part of our strategy
Cunningham's revenue drop-off contributed to a 10% reduction in Incepta's worldwide workforce last year, and the firm was forced to close its Miami office. Nevertheless, it managed some major wins in 2001, including tech heavyweights Sybase and Sun Microsystems, an assignment the agency will share with Alexander Ogilvy.
Although Sard - a transaction and crisis-oriented financial communications firm - has a confidential client list, it was in the news quite a bit in 2001 after Hewlett-Packard and Computer Associates retained the agency during their highly publicized proxy squabbles. "Companies need strong financial communications in good times and bad," says Nichols. "That is what Sard does best.
However, those who opined that the Sard acquisition would cause a headache for Incepta's other US financial PR operation - Citigate Dewe Rogerson - were slightly vindicated in 2001. Owen Blicksilver, who headed Dewe Rogerson's mergers and acquisitions business, transferred to Sard in February.
Blicksilver, who took a staff of three and an estimated $1.2 million in accounts to Sard, left the firm after only seven months and without having another job lined up. Both the firm and Blicksilver said the decision was mutual. Nichols notes that Dewe Rogerson now focuses on shareholder intelligence and investor relations work under recently appointed MD Paul Hebert.
Incepta also extended the reach of its Citigate Broadcast brand into the US in 2001, with the addition of a three-person New York office. The unit offers broadcast implementation tools such as b-roll/VBRs, satellite uplinks and remote television, radio tours, webcasts and broadcast media training.
Globally, the company experienced a growth rate of 9% as worldwide revenue reached $266 million, placing Incepta fourth in the list of global agencies.
Incepta continued to expand its reach in continental Europe in 2001, purchasing First Financial, a financial communications firm based in the Netherlands; Sanchis Comunicacion Group, an independent communications network based in Spain and Portugal; and Gunpowder, an Italian marketing concern.
Nichols says that although his company continues to derive the lion's share of its revenue from outside the US - 74% in 2001 - he expects the gap between US and non-US revenue to shrink over the next three to five years. "The sheer size of the US market makes the gap likely to narrow," he says.
The agency has been honest enough to compare what it would have earned in 2000 as a merged entity, with its revenues in 2001 - rather than treating the addition of BSMG as acquisitive growth in revenue. "We want to give a true picture,
says Diamond. "We encourage our people to act in a certain manner so we have to live that way too.
The results of such a comparison are not flattering, however, with US revenues falling 21% and staff being cut back from 1,502 to 1,092. Offices had to be closed, too: The firm's Miami and Louisville locations were sold back to their owner-managers; four offices are now housed in a single location in New York; while in Los Angeles and San Francisco three became one.
14 WAGGENER EDSTROM - $57,237,800
"Last year was quite a roller coaster, filled with ups, downs and twists,
says CEO and president Melissa Waggener in a statement. "I'd characterize it as a year of extreme focus for us. We worked harder than ever to provide value to clients during challenging economic times. We grew and invested in, and kept, our people, and continued to invest in the expansion that our clients require.
But not all was smooth in 2001 and the start of 2002 for this technology powerhouse.
Waggener Edstrom is known for building long-lasting partnerships with clients such as Microsoft. Until the end of 2001, the same could be said for the firm's relationship with software maker SAP. But following a "benchmarking process,
the client decided to switch to Burson-Marsteller, bringing an end to a six-year relationship. "Actually, we admit to learning a great deal in 2001, and we are a better company for the experiences,
EVP Katie Kemp agrees. "It was one of those things where you can spend a lot of time in analysis afterward,
she reflects. "We have huge respect for them as a company, and you look at the results and think they are really good. At the end of the day, they wanted a company with global reach."
Not quite in line with Waggener's roller coaster analogy, the agency's financial numbers reflect a straight path from 2001, with a 2% increase in revenues from $56.2 million to $57.2 million in 2002. Waggener Edstrom won a large piece of MasterCard's North America business early in 2001, as well as bioscience company Corixa and Children's Technology Group, which focuses on protecting the safety of children from the perils of the internet. Other new accounts include OutlookSoft, Alcatel and Applied Discovery. In addition to SAP, the firm said so long to a division of Siemens as well as an unnamed client that recently lost funding.
While none of Waggener's seven offices were shut down, its London location can still be classified in start-up mode according to Kemp, as it is still ramping up for business. Although many expected the SAP loss to result in a closure of the Germany office, there has been sufficient business to keep it running.
Though the firm had some 40 people working on SAP, Waggener reports no layoffs and a worldwide staff count of 485. New executives include Keith Lindenberg, SVP in the New York office; Jonathan Yarmis, VP responsible for the newly minted analyst practice; and Megan Kahn, head of the new business practice in the Northwest. Sandeep Kalsi and Atilla Shillinger both joined from Text 100 and are head of European and German operations, respectively.
The agency has been very satisfied with the response to the opening of and office in Stamford, CT - its first in the New York metropolitan area.
"I don't know why we are surprised, but we have been very pleased with the East Coast operation and how much interest we've gotten in it,
Kemp says that consumer technology work has been increasingly in demand, as well as corporate branding. The agency's Rapid Response Team - set up to provide quick turnaround on reporter queries - has seen a decline in its popularity, partly because of the reduction in targeted media outlets.
The major financial damage was done in the technology and financial practice areas. Tech revenues fell 27% from $124 million to $91 million, while revenues in the financial services sector fell 35% to just over $19 million.
Finally, Waggener has instituted a monthly grading system for the firm's client service performance to help its teams set and reach its objectives.
"Right now we are at a B+, and last year we started at a B-,
"One of the biggest objectives is our mandate from Melissa to remember why we are in business. It's because we have a customer."
15 BRODEUR WORLDWIDE - $39,601,900
CEO Andy Carney describes 2001 this way: "I like to call it the perfect storm. We had four big things hit our company and the industry," referring to the general economic decline, the dot-com slide, the reorganization of IBM's PR business and, of course, Sept. 11. "The tragedy delayed the economic malaise that was already under way.
Like many in the industry, Brodeur Worldwide could not avoid the fallout, watching its revenues decline 26% from $53.5 million in 2000 to $39.6 million in 2001. IBM's change in direction was certainly a major factor, as the company decided to consolidate its PR relationships with three vendors. Brodeur and its Omnicom partners - brought together as One Blue - were successful in winning the services part of the business, and Brodeur itself pulled in a number of important new clients, including Novell, Digital Island, WRQ, Abiomed and Primarion.
Healthcare was particularly strong in 2001, and it's showing signs of staying healthy again this year. In addition, Carney anticipates a continued demand for public affairs counsel in the technology sector. "More on the marketing-based programs, there is a real trend toward integrated communications, and we are being asked to work with clients that want developed approaches,
Carney admits that Brodeur should've been more careful about some of the business it took on at the end of 2000. She also regrets not making deeper cost cuts sooner, but it seems understandable from a firm that has never before had to reduce staff. The agency had at least two rounds of layoffs last year, totaling a loss of nearly 70 employees. (Brodeur's current staff number stands at about 500.) Further, changes in the Salt Lake City market led to a transfer of some business to its Phoenix office, and the remaining employees were relocated to on-site roles with one of its local clients.
"No one had any idea how long the economic recovery was going to take," Carney reflects. "As a culture, we have tended to put people first. But I think it would have been more fair to the overall business if we had made those cuts earlier in the year.
Regarding acquisitions, Brodeur recently bought FitzGerald Communications and is working with that agency to enhance its tech and biotech offerings.
In addition, Brodeur's Silicon Valley presence is being rolled into a new San Francisco office. Internationally, the agency acquired a majority interest in Seoul-based InComm, Korea's largest public relations firm.
This year, Brodeur has formed a new affiliate relationship with c-matrix, an agency in Switzerland.
"The reality is that the extent to which any agencies' revenues fell probably mirrors the extent to which they were exposed to the tech market,
explains Diamond. "Unfortunately for us, much of our financial work has historically been with tech firms too, doing tech-related IPOs, so our financial practice got hurt too."
Carney says she is proud that Brodeur never got into price wars to win accounts, and that the tough times have enabled her staff to refocus their efforts on serving its clients. "We took some of our biggest risks and chances in new ideas last year,
she says. One such idea is called "Service Excellence,
an initiative that uses a specific methodology to assess client satisfaction. Carney is also keen on continuing Brodeur's global momentum through partnerships and investments in Asia Pacific and other regions. "It is absolutely the price of entry these days to have a great global network.
Looking at the larger scheme, Carney says the economic downturn has yielded a new, more determined attitude within Brodeur. "Last year toughened us all up,
she explains. "We have a better product now and more of a business head on our shoulders.
Carney is unwilling to take any gains for granted, however.
"We learned the value of the relationships with the client,
she says, "and we are grateful to the companies that stuck with us."
16 COHN & WOLFE - $33,785,000
"In my twelve years as CEO, we've only ever managed for growth,
says Steve Aiello. "Last year, we faced a very different equation. We will not miss 2001.
Of course, this sentiment echo that of so many agency chiefs these days - but he might just be feeling the pain a little more keenly than some of his rivals.
It wasn't just that Cohn & Wolfe's revenues fell 19.5% to $33.8 million or that the agency had to reduce its staff 31% - from 256 last year to 175 at the end of 2001. The agency also made the difficult decision to close the office where it was founded, in Atlanta.
"From a business perspective, it was the right decision,
"There was not a lot of network business in Atlanta. But from a psychological and personal perspective, it was one of the toughest things I've ever had to do."
The closure followed a protracted and rather public tussle with the Atlanta office's chief executive, Tony DeMartino, who was accused by C&W of having used the firm's computers and other resources to start a rival agency.
"We had to make a stand on the issue,
says Aiello. The battle went to court, and although in the end the two sides settled, the incident will go down as one of the saddest and most testing periods in the company's history.
The court battle was also an ill-timed distraction for the agency's management team, as the rest of the business was facing a testing time, too. "We weren't surprised by the downturn,
says Aiello, who saw signs of the oncoming slump as early as the quarter four of 2000, "but I have to admit that we were surprised by the speed with which it deteriorated."
The agency fared better, says Diamond, in its consumer marketing, corporate communications and healthcare practices. These areas picked up accounts from top corporations such as Unilever, DuPont, Agilent Technologies, General Electric, Pfizer and Pharmacia. And Diamond believes these kinds of clients are now seeing the benefit of the agency's size and breadth.
The agency lost a number of clients last year, although according to Aiello, only a couple of those were major assignments. Deloitte Consulting moved its business - except for the German portion, which was retained by the agency - and with the closure of the Atlanta office, C&W missed out on pitching for the consolidated BellSouth business.
In addition, a number of technology start-up accounts were axed, but it was cutbacks from clients still on the agency's roster that really hit revenues the hardest. "Agreed budgets were slashed,
says Aiello, "and projects were put on hold or even cancelled. Most of our people have mainly lived through some very good times and we were all shocked."
On the plus side, new business victories turned out to be C&W's saving grace. Fresh work from Microsoft.com, DuPont, 3M, Taco Bell, Aventis and Pfizer helped stopped the rot. Those wins actually provide almost two-thirds of the firm's current revenues, and now give the agency reason to start looking forward with optimism. The agency added biotech and internal communications practices this year as well.
"You have to learn from these experiences,
says Aiello, "and I believe we've done that. The downturn has been our opportunity to refocus the agency on our strengths, such as our healthcare, consumer and corporate practices and our culture."
Reflecting on C&W's personnel, Aiello says, "We have a creative, collegiate team. They are responsive and they maybe even have a little attitude - they revel in coming up with unexpected solutions with tangible results.
We now have a clear view of how we're going to grow the agency.
He also says the agency has a good record for expanding business with existing clients, and he is planning to refocus on that strategy in the coming months. And Aiello has a swift rebuttal to the idea that the agency might be merged into one of WPP's other PR firms: "Cohn & Wolfe is a strong brand, with a strong heritage. We just had one bad year."
17 SCHWARTZ COMMUNICATIONS - $30,375,804
Founded in 1990, Schwartz Communications suffered its first ever revenue decline in 2001, falling 8% from $33 million in 2000 to $30.4 million last year. But president and cofounder Steve Schwartz isn't dismayed over the end of his agency's decade-long streak. "On a relative basis, that turns out to have been a pretty good performance compared to other hi-tech firms,
Schwartz has 160 people currently staffing the agency's two offices - its headquarters in Waltham, MA, and an outpost in San Francisco. Nine percent of the East Coast staff was laid off in May, but the firm has been ramping up this year, particularly on the West Coast, where seven people were hired just last month.
Although Schwartz refuses to discuss senior executives who have left the firm, he maintains that the team is "pretty intact.
One key addition last year was Gary Thompson, who was a founding director of the Reputation Institute and former president of Shandwick International. Thompson heads up agency operations in San Francisco, and last August he launched a brand management practice. In addition, Ron Kalb joined Schwartz in 2001 as SVP in the San Francisco office.
"We brought 28 brands together this year, and each has something different to offer. Clients are starting to use the different sets of expertise that we've got."
Thompson believes PR on the West Coast is starting to show some signs of life, and not just from companies looking to change agencies. In 2001, Schwartz picked up work from startups and companies that have not retained external PR counsel in the past. New business wins for the year included Borland Software, Cysive and TruSecure. Another positive sign for an industry turnaround in 2002 is the fact that in April alone, Schwartz pulled in nine new accounts on both coasts.
"I think it will be interesting to see what kind of upward pressure there is on budgets, which came down to ridiculous lows last year," Thompson says. "I was dealing with these kinds of budgets in 1984.
In addition to the new brand management practice, the agency focused more attention on government relations as well as special events planning and execution. No practice area was phased out, and Schwartz was able to build on its experience with medical device manufacturers and life science companies in an effort to cultivate new business.
The agency also tried to help its management team respond to industry changes in 2001 by having its VPs trained in new competitive disciplines.
In addition, Schwartz has invested in marketing itself more heavily than ever before. "We practice what we preach,
says Schwartz. "We did for the agency what we have always advised our clients to do.
While Schwartz is reluctant to discuss his strategy for the future - "I don't think I want to telegraph our punch to the competition
- he is optimistic about the future of the industry as a whole, "assuming we can avoid another Sept. 11 crisis. But I think the situation is somewhat existential because no one can prevent political instability.
He is also reassured by the fact that the PR industry has managed, on the whole, to thrive in spite of the turmoil. "In my view, PR agencies turned out to be pretty resilient,
he says. "That's unusual, because when an industry is under the kind of stress that this one was last year, you usually see a Darwinian shakeout. That didn't happen.
The ability of the PR industry to evolve and improve in the midst of tough times is an extremely positive sign, according to Schwartz. "It suggests that PR agencies are better managed, better funded and more scalable than anyone ever imagined,
18 THE MWW GROUP - $29,257,830
When the economy turns downward, "you simply adjust and set new business objectives,
explains Michael Kempner, CEO of The MWW Group. The shop's Los Angeles office, for example, started out heavily orientated toward public affairs before it changed gears and chased the tech wave. But in the second quarter of 2001, the office restructured and began to turn back to its historical strength of public affairs.
"We aligned our company with the financial environment and, all things considered, I am quite pleased with our final numbers,
"Although we had no growth, we were still extremely profitable.
The agency ended the year with $29.3 million in total revenue - a decline of 22% from 2000.
With a wealth of experience in government-related work, MWW spent a large part of 2001 on public affairs, particularly the issue of appropriations.
"People need the funding of government in down times more than ever," Kempner points out. The agency also introduced Capital Edge, a network spread across all 50 states that gives East Rutherford, NJ-based MWW and its clients the ability to lobby nationwide.
Diamond is expecting a flat 2002, noting that revenues for the year will include a pretty dismal first quarter, reflecting earnings that were billed in the first quarter for the last quarter of 2001. But he says he sees signs of growth. "It might sound funny given the revenue decline last year, but the Weber Shandwick we are building is all about growth, and our people see it. I think they want to be a part of that."
In January 2001, the firm acquired Werkhaus Creative Communications - now called Werkhaus at MWW - to expand its interactive capabilities.
Based out of the company's Seattle office, Werkhaus concentrates on web design, creative services and branding. "We brought Werkhaus on board because we feel it will continue to be a significant profit driver that will fully round out our integrated marketing communications practice," says Kempner. The acquisition has brought in well-known clients such as Nike, Microsoft and Nintendo.
New accounts not related to the Werkhaus addition included Invest UK, Getty Images, Bethlehem Steel, Parsons Infrastructure and Verizon. So far in 2002, the agency has picked up $4 million in business ($800,000 in its Los Angeles office alone) from new clients such as Hitachi, the Scleroderma Foundation, Kaiser Aluminum and the University of Maryland.
Expansion of the Nikon and McDonald's accounts has also contributed to 2002 starting off on the right foot for the company.
The agency did, however, lose business from Global Streams, Kemin Foods, Autoweb, World Chain and Zany Brainy - although Zany ultimately ended up being a win when MWW was rehired to do its restructuring. The agency is yet to suffer any lost business this year in excess of $500,000. Recent losses have come from the New Jersey Development Disabilities Council, the Dairy Farmers of Washington State, Camden International and Varsity Entertainment.
Staff turnover at MWW peaked at 27% for 2001. The agency went from having 212 employees at the end of 2000 to 155 at the end of 2001 - though that number is already back up to 170. Kempner says with pride that "although we had to make some adjustments, no key employees left voluntarily or were let go during our layoffs.
Among the new senior-level hires were David Herbst, SVP in Los Angeles; John Burgess, SVP (from the Werkhaus acquisition); Jeffrey Walter, VP in Washington, DC; Jonathan Alexander, deputy federal affairs director in Washington, DC; and Theano Apostolou, senior account supervisor from Dan Klores Associates.
Anticipating 20%-25% growth for the upcoming year, MWW is banking on its Werkhaus acquisition, its strengths in public affairs and crisis communications and its new entertainment, economic development and sports marketing practices.
"The leaders will remain leaders, and I expect positive momentum across all practice and geographic areas as the economy begins to pick up," says Kempner.
19 PUBLICIS DIALOG - $28,631,788
"Put it this way,
says Andy Hopson, president and COO of Publicis Dialog. "We started 2001 more optimistic than we should have.
Although Hopson seemed pleasantly surprised upon discovering that his agency remained in the top 20, a 4% fall in revenues to $28 million made for some tricky phone calls to Publicis headquarters in Paris. "I adjusted my projections every quarter,
2 FLEISHMAN-HILLARD - $263,345,095
"Tech was probably our best and worst performing area, if it's possible to say that,
Hopson notes. However, it was the agency's mainstream marketing capabilities - consumer foods, in particular - that helped it stay relatively buoyant. "People are still eating, I guess,
quips Hopson. These clients caused some interesting work after Sept. 11, but the attacks also took their toll. "We had lots of tech business in New York, and spent several weeks when revenues just were not coming in,
he says. "We continually made adjustments to expenses and overheads."
While Publicis Dialog did suffer layoffs, "We didn't lose very many people that we didn't initiate,
says Hopson, adding that those numbers, though "aggressive,
were in proportion with the reduction in revenue. Overall, turnover was 31%. A key staffing move for the agency - underlining its creative approach and consumer marketing expertise - was the promotion of chief creative officer Steve Bryant to president and CEO of the Seattle office. Over the past few months, that location has picked up Safeco, Washington Apple and the Washington State lottery. However, Seattle still finished down in revenues, as the lucrative VoiceStream and Whole Foods accounts left. (The Dallas office, servicing Samsung and Nestle, remains the most profitable.) The other significant loss for the agency was Iomega.
Publicis Dialog effectively lost two offices in 2001 in what Hopson describes as a "refocus.
Indianapolis became an all-advertising and marketing services shop, with its (dwindling) PR business now serviced out of Chicago. And the Salt Lake City office became direct marketing only when its PR work dropped off altogether.
There are no plans for any new offices this year. Instead, the agency seems more inclined to spread its wings via its relationship with yearling sibling Publicis Consultants. This brand, launched at the beginning of 2001 to focus on strategic counsel, is now a $40 million network with agencies from Paris to Japan, according to Hopson. (Publicis Dialog, as a PR brand, operates only in the US.) Publicis Dialog's "informal but well-defined global partnership
with its sister is opening up new avenues, including a 60% stake in DC public affairs firm Johnston & Associates.
One of the agency's proudest wins of 2001 was a $125 million, five-year integrated public health campaign for the Centers for Disease Control, shared with sister shops Saatchi & Saatchi and Frankel. Hopson likes what he's tasted of government work, and he's focused on adding to it.
And his insistence that this year has already brought about some intriguing new business opportunities isn't just bravura. At press time, a major government contract was about to receive an RFP with Publicis Dialog's name on it, and 2002 has seen new business from Vivendi Universal and increased work from Nestle.
The year will get interesting for Publicis Dialog around June, when the nuts and bolts of Publicis Groupe's acquisition of Bcom3 are put into place. Publicis Dialog, and sibling Rowland Communications, will enter an extended family that includes Manning Selvage & Lee, though whether any consolidation or wholesale realignment is in the works remains to be seen. "We're concentrating on consummating the deal,
"We've been encouraged to extend the hand of friendship, but it's not the time for partnerships yet."
20 FITZGERALD COMMUNICATIONS - $22,829,998
FitzGerald's debut in our top 20 will be its final bow as an independent shop; after eight years of going it alone, the agency was recently acquired by competing tech brand Brodeur Worldwide. Maura FitzGerald, president and CEO, is already looking ahead. "Brodeur and Omnicom have such a rich breadth of service, I feel that we can really leverage that on our clients' behalf,
Sometimes running in place isn't a bad thing. Just ask John Graham, chairman/CEO of Fleishman-Hillard. His agency's 2001 US revenues - roughly $263 million - were a scant 0.36% higher than in 2000. But in a year when 15 of the top 20 firms in the country saw revenues drop, Graham will take the gain, and he's predicting an advance of 10-15% in 2002. "If we take out the dot-com business, we had a good year,
insists Graham, who says the agency saw revenues rise 11% in 2001 if you factor out its dot-com losses.
FitzGerald also finds a lot to be proud of in her firm's performance during 2001. In spite of an industry downturn that defied logic - "I think the rapidity and the steepness of the business going south was surprising to me
- the firm finished the year with a 6% increase in revenues ($23 million in 2001 compared to $21 million the year before).
FitzGerald says that during the first half of the year, her agency did "blockbuster
business, helping it stay ahead of the game in the last two quarters. The firm's biggest account wins in 2001 were PwC Consulting, NeuStar, Lexign, MRO Software and Iridium. However, losses outnumbered the victories, as clients such as Watchfire, Rebar, LifeFX and Enterasys Networks went away because of funding issues, Qunitus filed for bankruptcy and CrossWorlds was acquired by IBM. Sirius is also no longer a client.
New service offerings were added in the second half of the year and remain objects of focus in 2002. These include "special situations," combining IR and PR strategies to help clients with issue and crisis management when confronted with issues such as mergers, layoffs and poor earnings.
reflects an increased interest in biotechnology and life sciences, a practice that will expand in coordination with Brodeur's plans.
- managed principally out of Washington, DC - aims to help clients identify policy issues that will further corporate positioning goals and bring companies into national concern. Finally, "Image Insight
is the firm's new measurement system, offering clients six different metrics packages.
For FitzGerald, employee development continues to be a major focus. The agency laid off at least 6% of its staff at one point in Boston and San Francisco, and closed its office in Los Angeles after only six months.
Although the firm does not break out its performance by location, or by practice area, the Los Angeles office was clearly a problem. FitzGerald's only real regret is opening there in the first place.
"In retrospect, that was a mistake,
she says. "We did it toward the beginning of the year when things were looking very strong.
FitzGerald adds, however, that staff reductions were made across all levels of the organization, leaving a strong, experienced team to continue servicing clients. "We worked hard to teach them how to manage in that difficult kind of environment,
In fact, FitzGerald says that what gives her the greatest satisfaction when looking back at 2001 is the attitude of her staff. "They really pulled up their pants and were really in the trenches,
she says. "Some days it was the only reason I went into work.
FitzGerald remains bullish on the technology industry, in spite of the knocks it has taken recently. She also says technology clients have much higher expectations of what PR can do, because their understanding of the importance of the industry has grown.
In conjunction with Brodeur, FitzGerald wants to strengthen her agency's global offerings and focus on retaining existing clients. "Last year was tough, but what is emerging out of that period is companies that are stronger, that understand marketing better, and a PR industry that better understands attending to client needs."
As a result of the tech wreck, Fleishman's KVO operation shut down in Mountain View, CA, and its Cleveland office failed to meet expectations, seeing revenues drop 19% to $3.4 million. Overall, its staff fell from 2,600 to 2,288 as the year ended, although Graham says "a lot of that was attrition,
Fleishman also suffered some notable business losses. After a decade as a client, Dell Computer dropped Fleishman as its agency of record, and a seven-figure account with the US Mint disappeared when the client decided to suspend all communications contracts. Lotus was another high-profile loss. On the other hand, Fleishman boasted some significant wins, including Kodak, Abbott Laboratories, Yahoo! and the Library of Congress.
This year, it's picked up business from Sun Microsystems and Pfizer while grabbing community relations work for McDonald's.
"New York, Washington, St. Louis and Los Angeles are offices that right now are doing really well,
Graham says. So far this year, the agency hasn't lost a major account. In fact, its picked up 300 new pieces of business from January through mid-April, a major reason for Graham's upbeat outlook. Regarding current US prospects, "I'd put healthcare number one, and I'd put public affairs right behind it,
In Chicago, Graham has a big void to fill given the April departure of GM Bob McEwen to rival Burson-Marsteller, where he's become president of its Midwest region. Graham says a search is under way for a replacement, and claims McEwen's departure doesn't change his determination to grow in the Windy City. "We need to build up in Chicago. We're definitely not going to scale back there."
Internationally, Fleishman's revenues grew $6.6 million to $345 million last year. "Asia has been slow to pick up,
Graham says. "Europe was fairly strong last year, and it's starting to pick up there now.
The firm is doing more public affairs work in Europe, but "our bread and butter is corporate work, and that's true in Europe as well,
The agency opened a Berlin office last year and acquired offices in London, Paris, Milan, Prague and Munich with its acquisition of Herald Communications.
In the US, it bought GMMB - gaining more capabilities in public affairs - and merged with GPC, another public affairs specialist. Graham contends he now has the largest public affairs practice of any US agency as a result.
Although Fleishman fell out of the top spot among US agencies - losing out to Weber Shandwick Worldwide - Graham attributes the slippage to the fact that Weber has combined various agencies. "I have no doubt that at some point we'll return to number one, but it's not a goal of ours. There's no gnashing of teeth.
Graham points with pride to finishing first in the Harris survey of agency reputation for the ninth consecutive year. "I want to maintain our reputation,
he says when asked about his goals for 2002. He knows that reputation translates into new business from existing clients as well as new account wins.
This is a year Graham won't be satisfied with just running in place again.
3 HILL & KNOWLTON - $190,931,000
Asked how Hill & Knowlton grew its domestic operations by 9.5% during what was, for most, a decidedly wintry year, US CEO MaryLee Sachs skips talk of sweeping strategic visions and dives right into the nuts and bolts.
"We have less debt than some of the other big agencies,
says Sachs, who replaced Tom Hoog in October. "We also have a more balanced portfolio of clients, and that gave us some stability in an unstable market.
Like its competitors, H&K entered the 21st century chasing the dot-com prize. Unlike many of them, however, it wasn't knocked off balance when the economy suddenly downshifted, thus creating opportunities in more staid industries. "We did pursue those companies,
says Sachs, "but we tried to only go after the ones we thought would be significant players.
The agency also took steps to make sure it wasn't stuck with unfulfilled invoices should its assessment of a start-up's prospects prove overly optimistic. "We're global enough to have been burned by doing contracts in foreign countries,
she adds, "so we knew how to protect ourselves."
That's not to say H&K was able to shield itself from the recession entirely.
In March, the agency commenced a series of layoffs that resulted in a 20% staff reduction by year's end. It also closed the Mountain View, CA office of dot-com darlings Blanc & Otus as well as an outpost in Reston, VA, which was shuttered after the purchase of ProMarc, a Beltway-based tech shop. The only other acquisition the agency engineered last year involved the Clinton administration's preferred polling shop - Penn, Schoen & Berland Associates - which now shows up on the WPP organizational chart as a division of H&K.
"We had reductions, but we didn't have to restructure,
"The team working on a piece of business stayed on that business, and as a result there was less change for the client.
Another challenge H&K had to overcome was finding a successor for US healthcare chief Kathy Cripps, who was plucked to replace Jack Bergen as president of the Council of PR Firms. Cripps' replacement, Sheila Fagan, joins Diane Perry (corporate/financial), Vickee Adams (media communications) and David Langston (internal communications) as directors named last year.
Sachs claims that, for the most part, H&K's largest clients increased their orders last year. Account wins provided another source of growth, with multimillion-dollar assignments coming from Sony, the US Army and telecommunications giant Marconi, which signed on for a two-year assignment worth a reported $10 million. The final tally of the agency's 2001 billings showed it threatening the $200 million barrier, climbing more than $16.5 million to nearly $191 million.
Seeing the potential for additional revenue sources, H&K assembled a higher education group and convened a labor communications task force within its corporate practice. The agency's sports marketing services - recently called on to complete campaigns for Allstate and UBS Warburg - have been expanded as well. Such tinkering is necessary, says Sachs.
"Like everybody, we did not get to where we thought we'd be, but I think that through strong, intelligent management, we were able to get through a difficult year,
she explains, not sounding entirely like someone whose agency has defied the trends with its 2001 performance. "We've been doing a lot of things internally, because we need to be well poised to take advantage of the inevitable upturn."
Already, there are signs that a rally might be under way. So far this year, the agency's New York office has brought in seven figures' worth of new business. The work hasn't come from crises or bankruptcies, but from what might be considered for H&K an unlikely source - tech.
4 KETCHUM - $161,425,000
Despite being the only top 20 firm to post double-digit revenue growth in 2001, Ketchum CEO Ray Kotcher insists his company suffered through some tough times - even if it was named PRWeek's agency of the year. "We faced challenges like everyone else,
Kotcher says. "It wouldn't be fair to pretend we didn't."
Ketchum posted revenue of $161.4 million in 2001, compared to $143.7 million the year before, a 12% jump. However, excluding acquisitions, US revenue in 2001 was only about $139 million. Still, Kotcher says Ketchum snatched up $32 million in new business last year, including IBM, Starbucks, Kodak, Absolut and Global Santa Fe. Indeed, the firm remains strong in consumer marketing and healthcare, and Kotcher claims it even saw modest revenue growth in technology.
On the acquisitions front, Ketchum made three US-based purchases in 2001.
In January, the firm bought The Washington Group, a lobbying and public policy firm. The buyout brought Congresswoman Susan Molinari into the fold as well as a bipartisan roster of other high-profile Washington personalities.
"We wanted to strengthen our reach throughout Washington, within the administration and in the agencies,