Management consultancies are often eyed warily by PR agencies. Richard Mitchell explores how real any perceived threat actually is.
PR firms have long sought to offer high-level strategic counseling to clients. Moving beyond their traditional communications functions to also advise corporate executives on how to run their businesses is a potentially lucrative way for firms to leverage their knowledge of customers' operations.
To better position for such opportunities, firms are hiring management consultants and lawyers, enhancing their diagnostic tools, and in some cases - for example, Ketchum - acquiring a management consulting firm.
On a larger scale, some PR executives see such initiatives as a preemptive strike against management consultancies that are seeking to offer strategic counseling - as well as communications functions - to agency clients.
The prospect of consulting firms making a strong push into the agencies' realm loomed heavily over the PR sector in the late 1990s. While that threat never fully materialized, it still functioned as a catalyst in pushing agencies to strengthen their competencies.
Ketchum's 2001 acquisition of Stromberg Consulting was spurred in part by a desire to offer strategic services to clients - including organizational change and change-management functions - in addition to communications, says Ray Kotcher, Ketchum CEO and senior partner. He notes that 25% of Stromberg's work comes from Ketchum clients.
"PR has an opportunity to expand its footprint by providing valuable services to agencies' core clients beyond communications," says Gary Stromberg, Stromberg Consulting CEO.
"There are substantive issues that emerge from communications discussions that provide additional consulting opportunities."
Ketchum teamed with Stromberg in 2002 to support the communications efforts of Wilmington, DE-based client DuPont Textile and Interiors - now named Invista - when the large fiber and resins maker announced it was seeking an IPO. (The effort, however, was short-lived, and the company was eventually sold to Koch Industries.)
Regardless, the process still offers insight into the subject.
"I called a summit of the Ketchum team, and they brought in Stromberg to give our CEO guidance regarding change strategy and outside messaging, and how we should operate and communicate with our employees," says Carol Gee, Invista global brand director. "We went with them primarily for communications strategy. In the course of things, some business strategies also were recommended."
Stromberg also assisted Memphis-based FedEx's information technology group in prioritizing projects and aligning resources, says Eric Jackson, FedEx VP of corporate communications. Still, he says, FedEx and other companies would be reluctant to use PR firms and their associates for most traditional management-consultant functions, which might include providing advice on streamlining a company's supply chain or devising better tax strategies.
The two are still connected. But rather than having a hand in the strategic decision-making process, agencies are best suited to advise how a decision will be interpreted inside and outside an organization and to recommend the prime ways to transmit information to the target audience, Jackson says.
"It's important for companies to effectively communicate and be understood in both the workplace and marketplace, and that is not the core competency of traditional management consulting firms," Jackson notes. "The vast majority of consultants become partners by being intelligent people, not by being good communicators."
Indeed, top PR executives stress that their expertise and experience in providing communications guidance to clients makes it highly unlikely that management consultancies could succeed in the agencies' core business.
"There has always been an assumption that management consulting firms can use their access to the C-suite to provide a broader array of services that might involve communications and reputation-management consulting, but it hasn't happened," says Harlan Teller, president of the worldwide corporate practice and chief client officer for Hill & Knowlton. "Communications is not a basic competency of most consultancies."
The perceived threat that consultancies still could enter their territory, however, is leading agencies to develop new techniques for assessing the marketplace and providing topical counsel to clients, he notes.
Hill & Knowlton, for instance, annually conducts its own worldwide CEO survey to understand the major reputation concerns of the C-suite. It also operates a media intelligence system that provides clients with early warnings about hot industry topics they may eventually need to address.
The agency also measures the share of voice clients have in particular sectors.
Ketchum tracks the opinions of about 150 people influential to a client and feeds the information into a database, where it is analyzed and quantified.
The system enables the agency to monitor the positions of stakeholders and determine if corporate strategies need to be tweaked in response.
Such initiatives help firms obtain the cognizance that is vital for offering astute strategic counseling. But even as agencies enhance their information-gathering capabilities, clients still must recognize PR firms as being viable sources for high-level guidance. And that often requires getting the ear of decision-makers in the C-suite.
Don Spetner, SVP of global marketing and communications for LA-based executive recruiter Korn/Ferry International, and former VP of communications for Nissan, says PR agencies would have more impact on high-ranking executives if senior staffers were to devote their time to specific clients. But such a move is often fiscally prohibitive.
"At Nissan, we spent $500 million a year in advertising and our ad agency had a senior person dedicated to us," Spetner says. "He was as influential as any executive within the client company. But PR firms are in a catch-22 of not having enough billings to devote a top-level executive to the customer."
In any event, he agrees that most companies still would be reluctant to have agencies provide high-level counseling in such areas as operational reengineering or financial restructuring, which are outside of PR firms' recognized competencies.
This stigma of being inadequate for many strategic functions is one of the biggest obstacles PR firms face in competing for business with management consultancies, adds Tom Martin, SVP of corporate relations for ITT Industries, a White Plains, NY-based diversified manufacturing company.
"Agencies need - and deserve - to have a place at the executive management table," Martin says. "But the head of PR has to earn that seat by demonstrating knowledge of the client's business and the issues within the organization. It will take time to earn respect and be thought of in the same vein as management consultancies."
Imbalance in personnel
Some firms are attempting to sharpen their strategic-consulting credentials by beefing up their management teams. GCI Group last year hired Debjani Deb, its chief strategy officer, from consultancy Booz Allen Hamilton.
CEO Bob Feldman says the firm continues to seek people who can offer high-value counsel to customers.
"You've got to provide strong intellectual capital to clients," adds Feldman. "We've made considerable efforts to bring a more diverse group of people into our organization with the background and skills that complement those of the classic PR practitioner."
But most agencies still are unable to match management firms' range and depth of expertise. The largest consultancies have global networks of staffers with specific skills they can access as needed for clients' particular circumstances, says Jeff Tucker, a partner in Booz Allen Hamilton's global media and entertainment practice.
"You wouldn't go to the dentist if you are sick and you shouldn't look at people who are good with communications to help you with strategy," he asserts. "Top management-consulting firms are in position to keep investing in techniques and methodologies and are large enough to buy the best thinkers from around the world."
This imbalance in personnel makes it difficult for most PR firms to win business away from consultancies. But management firms also are often ill suited to take on the communications projects that many fear they wish to.
Among the few areas where each sector's functions intersect are crisis and change management, investor relations, and mergers and acquisitions.
Change management, for example, might require internal communications expertise to get employees to accept a new compensation system or to understand the benefits of using a different technique for calling on customers.
But consulting firms will often hire PR firms to assist them in such projects instead of handling the issues in-house. "PR firms moving into the management-consultancy space is almost a non-issue," says James Murphy, global MD, marketing and communications, for Accenture. "Many PR agencies would like to advise on strategies, but that isn't a practical aspiration. A typical PR pro doesn't have that skill."
Murphy, who was chairman and CEO in the Americas for Burson-Marsteller before joining the consultancy and still owns a 25-person PR and marketing firm, adds that few PR agencies are willing to pay the salaries necessary to attract top consultants.
Most consultancies, meanwhile, are uninterested in performing traditional PR functions because the profit margins are too small. And Paul Taaffe, Hill & Knowlton CEO, adds that the high fees charged by most management consultants also makes it unlikely that companies will seek them out for communications-related functions. "A $100,000 assignment for a PR agency is a reasonable one-to-two month project that most management consultants couldn't be bothered with unless they have excess people around," he says.
While instances of consultancies encroaching on PR firms' turf have been few, agency executives are not yet willing to totally dismiss the threat.
"Nothing major has ever materialized, but it might," says Marcia Silverman, CEO of Ogilvy PR Worldwide. "When it happens, we'll figure it out."