2005 Global Profile: The Hoffman Agency

CEO

Lou Hoffman

Headquarters location

San Jose

Total US staff

50

Total non-US staff

60

Worldwide office locations

Wholly-owned: San Jose, Denver, Beijing, Shanghai, Taipei, Hong Kong, Seoul, Tokyo, Singapore, London, Munich, Paris

Affiliate/partnership: Sydney, Mumbai

Proportion of the wholly- and majority-owned agencies that carry the parent's brand name

100%

Global structure

In Asia, our office heads report into a regional managing director. The regional managing director reports to CEO Lou Hoffman. In Europe, our three office heads also report to Hoffman.

Our CFO is charged with worldwide operations. Toward this end, our Asia Pacific controller reports dually to the AP MD and the global CFO.

A key point that distinguishes our structure from the typical global agency comes on the financial side. We do not maintain P/L at the office level. Instead, we're structured to keep P/L at the regional level. We believe such a structure greatly enhances the collaboration and teamwork across our various regional offices.

Specifically, a general manager has no motivation to "hang onto" budget since it all ends up in the same place (regional P/L). This means GMs are rewarded for doing what is in the best interest of the client across the region.

Key clients

Philips

Regions where account is serviced, and whether the work is done by an affiliate, partner or a wholly-owned office of the firm

All work performed by wholly owned offices in North America, Europe, Asia Pacific, and Japan.

Type of work done on the account, including practice areas involved

Product PR, thought leadership campaigns, executive elevation, and issues PR.

Length and type of engagement

We've supported Philips for four years.

Management structure of the account

We have a global lead that has bottom-line accountability for the Philips program on a worldwide basis. She sits in our UK office.

Each region (North America, Europe, and Asia Pacific) also has a lead that takes accountability for program execution in his or her respective geography.

We have 28 account professionals working on the account. While many of the account professionals spend time onsite at a Philips facility, no one is permanently housed at a Philips facility. In the case of Europe, we rotate account professionals into the Philips Eindhoven office on a regular basis.

How account is billed

Regional invoices go to both the Philips regional PR manager and the Philips global PR director.

Size of budget

Not supplied.

Xilinx

Regions where account is serviced, and whether the work is done by an affiliate, partner or a wholly-owned office of the firm

Work performed by wholly-owned offices in North America, Europe, and Asia Pacific.

Work in India performed by our affiliate, CMCG.

Type of work done on the account, including practice areas involved

Corporate communications (includes broadcast practice), product PR, and community affairs.

Length and type of engagement

We started supporting Xilinx in China six years ago.

Management structure of the account

Xilinx prefers a decentralized model. As a result, we have regional leads that report to the client's regional heads, but the account does not require a global lead. Fourteen account professionals work on the account globally.

The Xilinx PR director over Europe recently left on maternity leave. To compensate for this, we have one person onsite at the Xilinx UK facility roughly 40 hours each week until the PR director returns.

How account is billed

Regional invoices go to the client's regional leads.

Size of budget

Not supplied.

Client Three: iPass

Regions where account is serviced, and whether the work is done by an affiliate, partner or a wholly-owned office of the firm

All work performed by wholly-owned offices in North America, Asia Pacific, and Japan.

Type of work done on the account, including practice areas involved

Corporate communications (broadcast practice), investor relations, product PR, and thought leadership campaigns.

Length and type of engagement

We started supporting iPass three years ago.

Management structure of the account

The global lead for iPass sits in the United States with each regional lead (NA, Asia and Japan) reporting into her. Twelve account professionals work on the program.

How account is billed

One global invoice goes to iPass.

Size of budget

Not supplied.

Global revenues change from one year ago (Global revenue is defined as revenue generated by all regions)

Increase of 12%.

International revenues change from one year ago (International revenue is defined as revenue generated by all regions excluding the region in which the agency is headquartered.)

Increase of 34%.

It's interesting to note that 46% of our revenue in 2004 came from outside the US corridors. Even with solid growth in the United States, we still project that 2006 will be the first year that we see greater revenue outside the United States than in the United States.

This trajectory has caused us to rethink the entire concept of company nationality. Specifically, we view ourselves as a Silicon Valley company - recognizing that Silicon Valley is not a nationality - as opposed to an American company.

Global staffing change from one year ago

Increase of 11 percent.

International staffing change from one year ago

Increase of 27 percent.

Performance in light of expectations and the sociopolitical factors affecting performance

Our global/international performance met our expectations. We expected strong growth, and that's how things played out. Why the aggressive expectations?

At the macro economic level, we saw Asia Pacific finally recover from the SARS epidemic that paralyzed business for a number of months. We also saw the tech sector rebound to the point where tech companies are once again investing in markets beyond the US borders.

It's also worth pointing out that the dot-com meltdown caused the mega shops to reduce or in some cases decimate their tech practices. As a result, we were in an even stronger position to win and maintain clients as the global tech market regained momentum.

Business won, or lost, in the past year due to a global PR consolidation by the client

Philips Semiconductors: After working with Philips Semiconductors in the United States and Europe, we saw the program start expanding to Asia Pacific.

InnoPath Software: The company decided it wanted one global agency to orchestrate its PR program in Europe, Asia Pacific and the Unites States. We won this brief.

Phoenix Technologies: After working with Phoenix in the United States and Korea, we saw the business expand to Europe.

Google: After working on ad hoc activities across Asia and Japan, we've formalized an ongoing business relationship in these two regions.

Best-performing regions

The best performing regions are Japan and China.

With the tech sector bouncing back, companies are once again recognizing that Japan encapsulates the greatest IT buying power in the Far East. Companies also see that Japan's consumers are on the cutting-edge of many digital applications, particularly in the areas of mobile telephony and digital gadgets.

At the risk of stating the obvious, everyone wants part of China and its rocketing economy. Furthermore, the Chinese government sees the tech sector as critical to long-term economic success. We have strong offices in seven of the top 10 markets in China.

Under-performing regions

The only market under-performing is Korea, which coincides with the overall decline in the Korean market. Plus, there's no getting around the uncertainty from the instability in North Korea.

Region targeted for increased investment of resources this year

We continue to see China as the crown jewel of our international operation. Last year, for example, we opened a second China office in Shanghai and funded a WOFE (wholly owned foreign enterprise) structure to give us greater flexibility in how we conduct business in China.

And our 2005 investments in China will exceed last year's investment. Toward this end, we opened an office in Taipei, Taiwan, a key move that allows us to sell a Greater China (mainland China, Hong Kong, and Taiwan) offering. Also, we're in the midst of developing a relationship with Peking University where we can have a role in delivering a communications curriculum. And we transferred one of our Beijing account managers to our Silicon Valley office to cultivate China new business opportunities in the United States, among other duties.

Region targeted for decreased investment of resources this year

We haven't decreased investments in any region.

New region/country under consideration to enter this year

As noted earlier, we opened an office in Taipei, Taiwan, earlier in the year.

In addition, we opened an office in Paris this year. As our business in Europe has grown, the demand for PR support in France reached the point where it was too much for our French speaker in our UK office. We see this office as strategic in the sense that we now have three offices in Europe (France, UK and Germany), which strengthens our regional value proposition.

Consideration of international acquisitions or organic growth

All of our international growth has been organic, although we wouldn't rule out an acquisition for the right opportunity.

International pro bono activities and other ways the firm connects with the regions in which it operates

We support the Harbour Business Forum on a pro-bono basis. This is a non-profit group of leading HK businesses looking to provide input on appropriate harbour developments.

Key changes made over the past couple of years that were driven by clients' changing needs

Clients often find that a budget for a given region cannot cover all of their priority markets. To address this issue, we created a billing structure called a Rolling Regional Pool. This way, there's a formal process in place that enables a client to cover multiple countries with a modest budget.

For example, a client might have a monthly budget of $10,000 to cover the UK, Germany, France and the Nordic market. In our model, the regional lead works with the client to decide how that budget should be allocated on a quarterly basis ($30,000) to leverage the local activities in each market with the greatest PR potential. Again, because we're structured with P/L at the regional level, not office level, all of our country leaders are motivated to collaborate with such a billing structure.

As shared earlier, we've made and continue to make investments in China that have dramatically improved our China operation. This has largely been driven by clients wanting the same sophistication in its PR effort in China that exists in Western markets.

Perhaps the most important change in this regard is the hiring of Kathleen DesRosiers last year to spearhead our China operation out of Beijing. Kathleen brings 20+ years of experience to the operation including a number of years heading up Burson's Taiwan office. While our business plan didn't call for hiring such a "heavyweight" (not literally) until 2006, we saw our clients needing a true senior counselor in China to guide them through the unique issues that shadow the building of reputation in China.

The third change that is invisible to clients is that we overhauled our IT infrastructure. As our business has evolved to working more and more on multi-country programs, our global IT infrastructure becomes a critical success factor. As part of this overhaul, we designed a global e-mail system that is standardized on Microsoft Outlook and incorporates redundant servers, so e-mail remains up 24 X 7 on a worldwide basis. On multi-country programs, e-mail is absolutely a mission-critical application; hence, this change.

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