Interpublic Plans 3,000 Job Cuts; PR Firms Will Feel Impact
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Interpublic Plans 3,000 Job Cuts; PR Firms Will Feel Impact

The Interpublic Group of Companies announced disappointing second quarter results and plans to cut approximately 3,000 jobs—or 10 percent of its workforce. As a result, Weber Shandwick looking at closing several of its smaller offices.

Paul Holmes

  NEW YORK, July 27—The Interpublic Group of Companies, parent to Weber Shandwick Worldwide (including the newly merged BSMG Worldwide) and Golin/Harris International, this week announced disappointing second quarter results and plans to cut approximately 3,000 jobs—or 10 percent of its workforce. The cuts will impact both PR firms, with Weber Shandwick looking at closing several of its smaller offices in both the U.S. and overseas.
 
The results—second quarter revenue for the group down 4.3 percent to $1.7 million, and net income down to $117 million from $201 million last year—were particularly embarrassing coming just a few days after IPG’s biggest rival, Omnicom, announced revenues up 15 percent to $1.8 billion and net income up 19 percent to $154 million. Omnicom owns PR agencies Fleishman-Hillard, Ketchum, and Porter Novelli.
 
IPG said it would take a restructuring charge of $125 million related to its recent reorganization, including the acquisition of True North and the integration of Weber Shandwick and BSMG, and another of $375 million related to cost cutting initiatives and severance payments for the 3,000 who will lose their jobs. IPG has already cut an estimated 1,500 jobs this year.
 
According to chairman and CEO John Dooner, “Our net new business wins continued strong in the second quarter considering the difficult economic environment, totaling about $850 million in capitalized billings. However, operating results were hurt by the effect of the economy and the slowdown of client spending. Also, as a company, we did not reduce costs as quickly and as deeply as needed.  Obviously, these results are not acceptable.”
 
While advertising and media revenue was down about 8 percent, public relations income was up by a single percentage point in real terms, representing slightly less than 9 percent of IPG’s revenues. For that reason, cuts at the two major public relations units are not expected to be as severe as elsewhere in the organization.
 
At Golin/Harris, CEO Rich Jernstedt says the firm has cut about 100 positions so far this year and that “if any one of our units is not performing up to expectations, we have made adjustments. We have a commitment to the principles outlined in IPG’s press release.” Jernstedt says the firm’s technology business has slowed down, but that other areas, including investor relations and crisis management, have benefited from the clients who need to handle bad news.
 
At Weber Shandwick, the picture is less clear, because of the recent merger of two large agencies. BSMG has already consolidated several offices in cities where it operated multiple brands, combining The Financial Relations Board offices with BSMG, and more consolidation is likely to follow in markets where both BSMG and Weber Shandwick operate. Such consolidation will almost certainly result in a reduction in headcount.
 
Beyond that, the firm is believed to be looking at the viability of offices in smaller markets as it refocuses on larger clients. In the U.S., that might mean changes for offices in markets such as Louisville, which serves mostly smaller local accounts. Overseas, it might mean the closure of offices in tertiary markets such as Belfast.
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