SANTA CLARA, February 20—Like several of its high-tech competitors, Citigate Cunningham announced layoffs this week, reducing its professional staff by about 30 people as it struggled with the downturn in the market. But at Cunningham the restructuring will go deeper than a simple reduction in headcount as the agency reverses a reorganization it made in November 1999 and consolidates five separate operating units into a single company.
The 20 percent reduction in staff at Cunningham is the deepest cut announced to date, following January’s news that Middleberg & Associates, a bastion of the dot-com revolution, would lay off 20 and this week’s revelation that Omnicom’s Brodeur Worldwide would let a similar number of people go—most of them from its interactive group.
But Cunningham is also eliminating the new companies it launched in 1999—Cunningham Public Relations, the Brand Momentum Group, the Momentum Research Group, Cunningham Ventures, and Fifth Gear—and bringing all its staff back under the Cunningham Communication brand.
“It became apparent to me as I talked to our staff that people didn’t feel they were part of a single organization any more,” says agency president Andy Cunningham. “We created the five companies to create a more entrepreneurial organization, but what happened was that we took our best account service people and gave them management responsibilities, and they were spending more time on administration than on public relations, more time on our politics than our clients’ problems.
“There wasn’t as much teamwork as I would have liked. They got kind of competitive. People had this nostalgic memory of what it was like when we were one company. So we’re going back to one company, and we’re going back to what we always used to be: an organization in which the senior people are involved in accounts.”
At the same time, Cunningham herself plans on taking a much more hands-on role in the management of the agency and its clients.
“Since starting my own company in 1985 I have gone through three periods in which I was just burned out,” says Cunningham, who says she reacts to burn out by taking on more outside responsibilities. She currently serves on nine outside boards, including five non-profits, ranging from the Aspen Institute to the Young Presidents Organization—spreading herself too thin, she says now.
“I’m very much the right brain and [president and chief operating officer] Joe Hamilton is the left brain,” Cunningham explains. “And we had a company that was running on Joe Hamilton’s left brain only.” In hindsight, the problem was compounded by the departure—at the time of the Incepta takeover—of Ron Ricci, the architect of the firm’s “momentum management” methodology, a respected strategist and major rainmaker.
In the three months before Cunningham was acquired by London’s Incepta Group (in July of last year) and the three months immediately following the acquisition, the firm was seeing explosive growth, with annualized billings coming close to the $40 million mark. It began ramping up, adding staff. “What we thought was a trend turned out to be an anomaly,” says Cunningham. By the beginning of 2001, billings were closer to $28 million—still up over the firm’s 1999 revenues of $24 million, but far short of the anticipated growth.
The most conspicuous loss was Motorola, which selected Hill & Knowlton as its global public relations agency of record. At the time, the Motorola business was worth about $1.5 million a year. Meanwhile, the Fifth Gear unit, which worked largely with pre-IPO companies, was experiencing its own difficulties because, as Cunningham says, “there is no pre-IPO market any more.”
Under the new structure, several senior executives have new responsibilities. Dennis Maxwell, who headed Fifth Gear, is now western region president; Morris Denton, who headed Cunningham Ventures, will run the central region offices in Dallas and Denver (a small Chicago office has been closed as part of the restructuring); and Kristin Hilf, former head of Cunningham Public Relations, will head the eastern region.
Cunningham, meanwhile, says she is more engaged than she has been in years. “When new business calls come in, I take them all,” she says. “We have redrawn the organizational chart to put clients at the top. Our mission is the same—we want to redefine technology public relations—but we understand you can only do that by example, by working with clients.”
The Motorola loss aside, the agency continues to work with a roster of blue-chip clients, including Cisco, Kodak, and Sprint, and Cunningham is one of the three finalists for the Sun Microsystems account, which is worth as much as $15 million overall—although its unlikely that all of that will go to one agency. Cunningham is competing against incumbent Burson-Marsteller and Alexander Ogilvy for the lion’s share of the Sun business, with several boutique firms hoping to win smaller assignments.
Cunningham is on the list in part because of its relationship with Incepta, which affords the firm an opportunity to offer international reach. Cunningham works with Citigate Technology in the U.K. and Europe, and with Citigate Dewe Rogerson in Asia, and Andy Cunningham has nothing but praise for her (still relatively new) parent company.
“They have been as supportive as they could possibly be,” she says. “They have given us the freedom to make our own decisions.” Far from imposing the recent staff cuts, she says, Incepta managing director David Wright wanted to be sure the firm was not cutting too deeply.
Having said that, plans to acquire additional technology PR firms in the U.S. are clearly on hold. In the U.K., analysts’ perceptions of the U.S. tech market are not positive, and until that situation is reversed it’s unlikely that Incepta is going to be making any more deals. For the long term, however, Cunningham is confident the strategy is sound.
“What’s important to me first and foremost is the reputation of this agency,” she says. “We got to the top of the mountain and we started to tilt over the other side. The only way to get back is look at what you did right for all those years and to look at what you began to do wrong and then to re-engage. I have a three-year earn out and I’m confident we’ll be back on top before the earn-out is over.”