Part 1 of a two-part series. This story examines how globalization is affecting the economy, structure and service of the PR industry, top down. Part 2, to run next week, will
explore how small and mid-size players are responding to budget cuts in the midst of the economic downturn.
Penny-pinching has once again become a corporate way of life as sluggish earnings reports roll in for the second quarter. (Big guns like Exxon Mobil and AT&T bring to bear
the latest bad news for investors.) As PR budgets are indiscriminately slashed in the midst of larger company-wide cutbacks, agency bonds once deemed sacred are subject to
scrutiny.
IBM's current agency search for a new agency -- which will consolidateing some 50 agencies worldwide into three or fewer -- could signal a big change in how agency
relationships are negotiated in the future, at least among multinational organizations. "What we've decided to do is a major strategic shift in terms of how IBM works with PR
agencies," says Edward Barbini, VP of corporate public relations at Big Blue. The company's agency relationships will become strategically aligned with IBM's three core business
lines.
Under the IBM model, an agency becomes an "enterprise partner rather than a vendor," says Jack Bergen, president of the Council of PR Firms. This means that the client gains
full access to its partner's resources, including not only account service and specialty practices, but also technology platforms and internal creative capabilities. "It's a top-
to-top relationship," not unlike those forged by management consultancies, Bergen says.
Such are the rewards Motorola is hoping to reap just one year into its global consulting partnership with Hill and Knowlton. "We've always had a bit of a problem with how we
are perceived in the world," says Rusty Brashear, Motorola SVP and director of corporate communications/public affairs, noting the evolution of his corporate brand from car radio
company to semiconductor company to mobile phone company. "We need to do a better job of integrating messaging platforms across our businesses so people understand the breadth
and depth of our company."
Brashear says Motorola will continue to tap boutique agencies and emerging technology specialists with strongholds in non-U.S. markets, although with H&K (the primary
consulting partner) managing contracts for regional services in Latin America, Asia-Pacific and Europe/Middle East/Africa. "It's a lot easier to work with one main agency than to
coordinate across a broad array of agencies," Brashear says.
No doubt such client leanings in this direction are music to the ears of big firm execs like David Wickenden, head of global interactive services at Fleishman Hillard, who was
in on parent company Omnicom's pitch to IBM two weeks ago. "Over the next two years, you're going to see more big global corporations operating in multiple countries and time
zones integrate agency assets under a single umbrella and draw on the depth of resources you'll only find under a big tent," he says.
Other industry veterans are more skeptical of the mega-agency model. "Every time there is a downturn, we have consolidation, but it is notoriously temporary," says James
Lukaszewski, whose eponymous, elite consultancy provides strategic counsel largely to Fortune 500 CEOs in times of crisis. "Large agencies strive to be like McDonalds, and taste
the same in every part of the world. But we're not talking about hamburgers, we're talking about human beings." Where human creativity is the primary commodity, there are bound
to be quality inconsistencies, he says.
Corporations are lured by consolidation's theoretical promise of efficiency, cost-savings and deeper resources, although sprawling, worldwide partnerships are never as neat as
they seem, Lukaszewski warns. "If anything, actions like this stimulate retention of independent senior consultants and boutique firms to offer second opinions," he says. Clients
who buy into the "one-stop-shopping" agency model often end up hiring outside consultants down the road to audit their agency-of-record for quality control purposes.
Enterprise-level consulting partnerships can sustain themselves, however, if both parties take the relationship to a deep level, intermingling staffs and facilitating long-term
executive exchange programs - in short, cross-pollinating their businesses over a period of years, Lukaszewski hypothesizes.
"[Both parties] should have to sign long-term, unbreakable contracts and be willing to suffer variable levels of performance over time," he says. "True integration of PR means
integration into the operations aspect of the company. This is what has to happen for success to occur. Otherwise, it's just a vendor relationship that goes away whenever there's
a problem."
While the latest consulting theories have yet to be put into practice, few deny that the agency-client dynamic is evolving. As the globalization of PR services, moves from lip
service to reality, all eyes are on those brave enough to stick their toes in the water first.
"We are in a 'perfect storm' climate right now," says Cathy Lugbauer, COO of Weber Shandwick Worldwide (soon to become the world's largest PR firm with the acquisition of BSMG)
and chairman of the Council of PR Firms. "You've got the downturn in the economy forcing people to look differently at how they do things. You've got the morphing of marketing
communications disciplines and you've got new advances in technology. People will eventually look back and say this was a moment in time when the industry redirected itself and
became something quite different."
(Edward Barbini, IBM, 914/499-2804; Jack Bergen, Council of PR Firms, 877/773-4767; Rusty Brashear, Motorola, 847/576-5305; Cathy Lugbauer, Weber Shandwick Worldwide, 617/520-
7053; James Lukaszewski, The Lukaszewski Group, 914/681-0000; David Wickenden, F-H Interactive, 202/828-8848)
Time to Move On?
Jim Lukaszewski, principal of The Lukaszewski Group, says it's time to re-evaluate your agency relationship when...
It's apparent that you're working for them and they're not working for you - meaning the agency is simply implementing ideas you provide, instead of offering up strategic
counsel.
The agency takes key, experienced people off your account and substitutes people you've never met.
You're clearly getting less value than you were before. If your agency appears to be suffering from "account boredom," you may need to bring in a fresh perspective.
Use Lukaszewski's Web site, http://www.e911.com, as a resource for more tips.