ANALYSIS: Agency Structure - Do PR professionals get lost in the matrix?/Everyone in PR is buzzing about the matrix, and we don’t mean that nifty sci-fi flick with Keanu Reeves. But as Matthew Boyle discovers, the matrix approach to agency organiz

In the wake of Shandwick’s ouster of US CEO Michael Petruzzello, industry wags pondered why the firm abruptly dumped the man responsible for a good deal of Shandwick’s recent growth.

In the wake of Shandwick’s ouster of US CEO Michael Petruzzello, industry wags pondered why the firm abruptly dumped the man responsible for a good deal of Shandwick’s recent growth.

In the wake of Shandwick’s ouster of US CEO Michael Petruzzello,

industry wags pondered why the firm abruptly dumped the man responsible

for a good deal of Shandwick’s recent growth.



According to the firm, Petruzzello was a victim of Shandwick’s new

global ’matrix’ structure, which significantly reduced the scope of what

Petruzzello was running. ’We are just evolving this new practice, and

Michael wasn’t comfortable with it,’ says Scott Meyer, Shandwick

International CEO.



So, what is the matrix? Basically, what you have is worldwide practice

areas laced over geographic profit centers. National or global practice

area leaders direct thought leadership and assemble PR ’dream teams’ for

major clients, while regional GMs handle P&L statements and run their

respective offices. In some cases - GCI and Ketchum, for example - local

practice area heads must report to the GM down the hall and also to the

agency-wide practice area leader, who could be three time zones

away.



In theory, it tears down regional fiefdoms. In theory, it promotes

worldwide best practices by maximizing a firm’s intellectual capital.

But as Homer Simpson once sagely noted, ’In theory, communism works.’ In

reality, the matrix system is not the utopian image that agencies would

have you believe.



If not managed and communicated properly, the matrix can breed tension

between geographies and practice areas, disenfranchisement, clashing

egos and turnover among clients and staff.





Evolving toward the matrix



Over the past decade, all of the leading PR agencies have evolved from

geography-based systems to some variation on this matrix theme. They

point to the successful model provided by management consulting firms at

creating practice-based operations. ’Five or six years ago everyone was

a generalist and proud of it,’ says BSMG Worldwide president and CEO

Harris Diamond.



’Today most people are looking for a deeper understanding in particular

areas.’



Advocates of the matrix system say it allows a hi-tech specialist to be

brought in from San Francisco to help with a Boston-based technology

client. By the same token, it allows a consumer marketing specialist to

lend counsel to a hi-tech client, anywhere in the world. ’Clients are

asking for deeper expertise, and the matrix is reflective of that,’ says

Aaron Kwittken, EVP and GM of GCI Group’s New York office.



Some firms take the matrix model a step further, organizing around

region, practice area and major clients. But no matter how you slice it,

any agency CEO will tell you that the matrix system is the way the

business is evolving, and that his flavor of matrix management tastes

the best.



But there are holes in the matrix. One problem stems from the classic

Watergate mantra: follow the money. If P&L centers remain geographic,

the onus is upon regional GMs to make their numbers each quarter. What

incentive is there for regional managers to surrender work to another

profit center? ’There’s a tricky balance that has to be struck with

profit centers and the practices that cut across geographies,’ says

Porter Novelli CEO Bob Druckenmiller. ’It’s not always neat.’



Some agencies, such as Edelman, offer bonuses to managers who make use

of the agency’s resources in other areas. But what does it say when GMs

have to be bribed into playing the matrix game? And when so-called ’best

teams’ are assembled from various offices, who gets credit for the

work?



’You have to manage the matrix,’ says Michael Morley, president of

Edelman’s international operations. ’It’s a difficult thing to do, but

the right thing is to keep a balance of pure geography and sector

management. A lot of companies think that it’s too tough a solution and

they’re looking for the magic bullet.’



Tom Buckmaster, who spent 20 years in agency life before taking a

corporate gig at Honeywell earlier this year, says much of the matrix

talk is just that: talk. ’Agencies talk a good game about matrix

management, but it all comes down to geographic P&Ls at the end of the

day,’ he explains



One firm that sought a magic bullet was Burson-Marsteller, which in

January 1996 made a radical shift from geographic profit centers to an

industry-based P&L structure almost overnight. According to sources, the

switch resulted in the loss of high-level employees and clients. Burson

CEO Chris Komisarjevsky admits that the agency did experience some

growing pains as a result of its reorganization, but denies reports of a

client and staff exodus: ’There were people on staff for whom (the new

structure) was not something they were comfortable with.’



While Burson solved the problem of regional managers hoarding fees for

their own coffers, the switch was done abruptly and without much

internal communication. More importantly, the move disenfranchised some

GMs, who were stripped of P&L responsibility and handed nebulous ’market

leader’ titles. ’You had someone in charge of the future and someone in

charge of paper clips,’ says one source. Other sources questioned

Burson’s dissolution of geographical profit centers to mimic management

consulting firms. ’Jumping to the horizontal isn’t appropriate for PR,’

says Rob Flaherty, senior partner, global practices at Ketchum. ’The

model was created for management consultancies with larger numbers of

employees.’ Komisarjevsky refutes reports that Burson botched its matrix

play - ’I don’t think that was the case at all,’ he says. ’Other people

criticizing in back rooms don’t know about it.’



Harlan Teller, now executive managing director of Hill & Knowlton’s

corporate practice, was on the front lines at Burson during the switch.

Teller went to sleep one night as regional GM and woke up chairman of

the US corporate practice. He declines to judge the success of the

changeover, but he left Burson to join H&K’s nascent matrix 10 months

later. ’I give them points for doing something courageous, but I think

you could say people felt disenfranchised by the change,’ he recalls. He

says H&K’s matrix maintains P&L responsibility in the hands of the

regional GMs and even had a committee that kept abreast of people’s

attitudes during and after the switch. Burson had no such forum. ’It was

very much a top-down initiative,’ Teller says.



’It happened because senior management saw to it that it would

happen.’





Accounting for pros’ differences



Another hole in the matrix is that it doesn’t take into account the fact

that all PR pros are not created equal. ’What we’ve done wrong as an

industry is we are unable to admit the difference between a great

counselor and a great operator,’ Weber chief Larry Weber says. ’More

times than not, a great counselor in a practice area is not an

operations person.’ Buckmaster agrees: ’The skills it takes to become

successful as a mid-level pro are different from the skills required to

lead offices.’ There are also cases where the matrix is simply not

necessary. ’Some specialized capabilities, like public affairs or social

marketing, tend to have a geographic bias and don’t lend themselves to a

total cross-office matrix system,’ says Druckenmiller.



Finally, if the matrix system is the ideal, why is it that

Fleishman-Hillard has shot to the top of the US rankings without

straying far from its traditional geographic focus? The firm is placing

increased emphasis on cross-office collaboration, but CEO John Graham is

no matrix devotee.



’We will retain our (geography-based) structure,’ he says. ’The matrix

might work very well for (others), but we know what works for us.’ But

then, Fleishman calls itself the ’world’s largest hi-tech communications

agency,’ which proves that try as you might, you cannot escape the

matrix.





THE MATRIX: HOW SOME FIRMS DO IT



Burson-Marsteller: Has national practice chairs for

advertising/creative, brand marketing, corporate/financial, healthcare,

media, public affairs and technology. Burson also has market leaders in

Dallas, Detroit, LA, Chicago, New York, Pittsburgh, Sacramento, San

Diego, San Francisco and Washington, DC.





Ketchum: Six global practice heads (healthcare, workplace communication,

food & nutrition, brand marketing, technology and corporate) report to

senior partner/global practices Rob Flaherty. Office directors of each

region report to the senior partner/North America or senior

partner/International.





Fleishman-Hillard: In February, Fleishman formalized 10 worldwide

practice groups: technology, healthcare, public affairs, agribusiness,

reputation management, marketing communications, financial

communications, internal communications, biotechnology and litigation

support.





GCI Group: North American practice areas for consumer marketing,

corporate, technology, healthcare, research, public affairs and

consulting. General managers are responsible for staff in their

geography. Like Ketchum, practice group heads at specific offices report

to their regional GM and North American practice leaders.



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