Last week Biss Lancaster launched Sandpiper as an independent operation.
But are second-string agencies the final answer to avoiding client
conflict and expanding fees?
Try as they may, few PR agencies have mastered the art perfected by
accountants, banks and legal firms of managing a portfolio of clients
whose interests conflict.
Both advertising and PR agencies have tried creating all forms of
Chinese walls, from flimsy partitions in offices or account teams
working on different floors to branding separate divisions. Some go even
further by creating a ‘second-string’ agency, which is often positioned
as a small specialist boutique.
This is exactly what Biss Lancaster did last week when it set up
Sandpiper as a second-string agency to focus on healthcare and brands
and act as a small ‘rapid response unit’.
Biss Lancaster, like many large agencies, has been finding it
increasingly difficult to expand its fee income as it now has a client
in most sectors. In announcing the move Sandpiper managing director and
Biss Lancaster deputy md Pippa Sands said it was aimed at ‘managing
conflicting business for different clients’.
Others have taken a similar route. Burson-Marsteller bought US agency
Cohn and Wolfe in 1984 before bringing it to Europe in 1989. Countrywide
Communications set up Affinity and Text 100, which handles Microsoft,
created Byte to run the rival Apple account.
So, brave a move as it is, are the hefty costs of running a second
agency justified? And what does it have to do to convince clients that
it is, indeed, a separate company and not just an elaborate Chinese
There is enough scepticism from both agencies and clients to suggest
that setting up a second-string agency is no guarantee of success.
However, if well managed, the obvious benefit is that it allows it to
expand its fee income by handling clients who are in the same market.
Several clients believe that, for one to work, a second-string agency
has to be completely independent - that is, it has to be housed in a
separate building, with a different telephone number and, most
importantly, be staffed by completely different people with a separate
management to the sister agency.
Experiences from the ad industry confirm this. George Michaelides, the
former media director at agency Howell Henry Chaldecott Lury, set up a
small media planning boutique, Bullet, within HHCL but found it
difficult to convince non-HHCL clients that he was independent of HHCL
while he shared their premises.
Countrywide Communications Group chairman Peter Hehir says Affinity’s
launch was a way of ‘increasing our offering’ rather than dealing with
client conflict. He believes there are other ways of handling it. In his
case it has been through the six offices which make up Countrywide
Communications, each of which operates as a separate company with its
own board of directors.
‘We can demonstrate to clients that we have separate teams of people in
separate offices. We will use staff with specialist knowledge in
different offices for brainstorming sessions, but only where this will
not compromise their clients,’ says Hehir.
Hill & Knowlton UK chairman Antony Snow agrees that second-string
agencies are not the best way to manage conflict.
‘It is more economical to have Chinese walls within an agency and it is
better for the client because all the add- ons the client needs will be
the best ones, not the second best ones. If lawyers and accountants can
do it and keep their mouths shut there’s no reason why we can’t,’ says
H&K also has a second agency. Carl Byoir, the agency it bought 10 years
ago and which was folded into H&K, was re-established as a brand in both
the US and the UK two years ago.
Mike Gates acting head of consumer communications at Smith Kline
Beecham, a Biss Lancaster and now a Sandpiper client, says that
everything a client can do to prove there is full confidentiality for
the business helps. But he points out that there will always be
confidentiality problems in an industry where people are constantly on
Apple marketing communications manager Russell Brady, who used to work
at Text 100, believes ‘if an agency is committed to making a go of it
they really need separate offices and separate resources’.
In this respect, Sandpiper has, initially, only gone ‘half way’ as it
will be using Biss Lancaster’s Covent Garden offices. Although Sands
says she will be building a strong core team and using freelance staff,
she did not rule out using BL staff on a project basis.
NatWest director of corporate affairs Simon Lewis agrees with Brady that
separate offices help relieve client concerns about conflict. However,
he goes further in advocating the need for fully qualified compliance
officers in the large consultancies to ensure that the highest degree of
confidentiality is maintained.
However, Lewis is unlikely to gain support from agencies who are always
keen to reduce their overheads. Countrywide’s Hehir retorts: ‘There
already is one here. Its me - its called the chairman and managing
director. We don’t need any other titles.’
Despite scepticism about second-string agencies, it is clear that large
agencies have to take some action in dealing with the problem of
expanding their fee income when they have clients in most sectors.
That problem could grow as international companies start hiring
international PR networks and widen their definition of client conflict.
It is a trend which has already hit the ad industry costing many large
ad agencies long term accounts and millions in lost billings. As they
discovered, second-string agencies have not always been enough to save