Agency Management: Moderation is key to B-M’s restructuring - Burson-Marsteller has continued to grow following its replacement of a country manager structure with a practice area model, but only by being flexible in its approach

Ever since Burson-Marsteller began its much-vaunted restructuring programme, international agency heads have been watching closely to see whether it would end in triumph or disaster. B-M’s figures for 1998, released last month, show a 4.2 per cent rise in fees to dollars 258.4 million (pounds 160 million), which suggests the tactic is working.

Ever since Burson-Marsteller began its much-vaunted restructuring

programme, international agency heads have been watching closely to see

whether it would end in triumph or disaster. B-M’s figures for 1998,

released last month, show a 4.2 per cent rise in fees to dollars 258.4

million (pounds 160 million), which suggests the tactic is working.



In a bid to consolidate its position as global market leader, B-M sought

to dramatically re-engineer the way it did business.



Out went the country manager structure to be replaced by a practice area

model, whereby the business has been divided into such sections as

healthcare, IT and finance, and regions such as Europe and Asia. Greater

emphasis has been placed on developing key client relationships:

partnerships with larger clients, often global in nature, which

frequently require input from more than one practice area.



Together with its downplaying of the term PR in favour of the more

widely encompassing ’perception management’, the changes have been seen

as a radical departure. B-M and its rivals are now assessing the success

of the strategy.



Certainly the transition has not been without its problems. Offices in

the Czech Republic, Hungary and Malaysia were bought back from B-M by

local management after they had experienced difficulties cultivating

large international clients rather than concentrating on purely domestic

business.



Two senior managers - B-M Barcelona managing director Pablo Llorens and

corporate communications director Alejandro Daroca - walked out in Spain

last summer after disagreeing on the policy of favouring international

clients to the possible detriment of local ones.



Such negative reaction from both clients and staff prompted a degree of

modification to the restructuring.



’At first we almost abandoned geographics, but experience has shown

geographics to be indispensable,’ said vice-chairman of client services

worldwide Jeff Hunt last year.



Ogilvy PR Worldwide’s European president Paul Philpotts, who saw the

changes implemented from the inside while UK managing director at B-M,

remains a great believer in the concept.



’Clients find it gives the person in the centre enormous power to get

things done,’ he says. ’But the trade-off is that offices which aren’t

in major economies tend to be left behind. It seems to me that B-M is

moving to a logical, hybrid, approach whereby smaller offices are

allowed to handle smaller, domestic business to underpin their own

revenues.



At one time, there had been talk of B-M turning its nose up at accounts

worth less than pounds 100,000 in annual fees. A more pragmatic approach

now seems to hold sway, with smaller accounts being taken on if a good

business case can be made for them.



B-M Worldwide CEO Chris Komisarjevsky says: ’When implementing a

practice structure, it is a mistake to de-emphasise the local market. If

you don’t have local clients, global clients won’t be interested in

using your services.’ He admits the pendulum has swung back a little to

a geographic structure.



As well as positioning B-M in the marketplace, the focus on key client

relationships must, to some extent, be financially driven. B-M’s parent

company, advertising group Young and Rubicam, is stock market-listed and

is eager to increase its PR subsidiary’s margins. The best way of

achieving this is with large international accounts.



However, this respectable total masks inconsistencies across the

globe.



US fees have increased 15 per cent, UK fees are up 24 per cent, but

mainland Europe was flat and Asia-Pacific suffered from the economic

crisis in the region.



But key client relationships did account for 36 per cent of the firm’s

overall revenue, up from 32 per cent in 1997. In this regard, B-M’s

restructuring must be considered a success.



Many of the restructuring problems have been at the clerical and

accounting level, with confusion over which practice area should charge

for the work done. Before its 1998 flotation, B-M wrote off pounds 2.5

billion because of accounting problems in Europe, as well as losses

sustained through the Asian meltdown.



Shandwick Europe chief executive Michael Murphy applauds the bravery of

B-M’s ’single-minded focus’, but thinks there were some flaws in how it

has been applied.



’I think (B-M) has backtracked on the strategy in places like mainland

Europe and Asia which suggests it has not been an unqualified success,’

says Murphy.



’Retreating from markets where they are less profitable sends a signal

to the marketplace that they are not a global player. Sometimes you need

to keep an office that’s not profitable in the interests of the

partnerships you have with your clients,’ he adds.



Edelman PR Worldwide president and CEO Richard Edelman has similar

reservations, but adds: ’Like American democracy, their’s is a noble

experiment.’



This particular experiment has not blown up in B-M’s face. But that is

arguably because the original formula has been adapted, resulting in a

policy not quite as pure as the theorists envisaged.



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