Project Blue: The Formation of Magnet
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Holmes Report

Project Blue: The Formation of Magnet

Four agencies were brought together to create this new entity, and -– because employee retention was the overriding goal –- employee communications played a critical role.

Paul Holmes

  This program focuses on the employee communications aspect of the formation of Magnet Communications.  Four agencies were brought together to create this new entity, and – because employee retention was the overriding goal – employee communications played a critical role.
In May 2000, Creamer Dickson Basford (CDB) decided to merge with its sister agency, ACG Communications, and acquire both Kratz & Jensen (K&J) and Capstone Communications.  The combination of these firms would create a single, full-service entity with approximately 225 employees in eight offices across the country, making it a major player overnight – and one of the largest merger & acquisition (M&A) deals of the year.  But for us, it was more than that.  We saw it as aligning the careers and talents of more than 200 employees to set a new standard in the industry, creating an agency with a truly people-focused culture.
At the time, the public relations industry was enjoying unprecedented growth and, as a result, demand for talented staff was at an all-time high.  For many firms, the challenge of staffing quickly overcame the more traditional challenge of business development.  In fact, a shortage of qualified staff became the only barrier to business development.  Employee retention and recruitment were clearly the keys to success.
With this in mind, we moved forward with the M&A, which we code-named Project Blue.  We knew that, as is always the case with M&As, staff retention is a challenge because people are naturally resistant to change and there is a degree of uncertainty and insecurity that comes with such changes.  We also knew that we were dealing with several different audiences, each of which would likely react differently to the deal.
For the CDB staff, the agency had just turned itself around and there was fear that an acquisition might distract us from our newfound course.  For ACG, the concern was that a company specializing in large meetings & events was going to be swallowed up and become nothing more than a fulfillment house for a PR agency.  For K&J and Capstone, the concern was two-fold.  First, there was the typical concern over a change in management and ownership – the fear of the unknown.  Second, there was the concern that employees might only know the old CDB – which was not necessarily known as a great place to work – and start jumping ship before we even got everyone under one roof.
We knew that we had to be clear and quick in all communications.  The first 3-4 months were critical, as that’s when employees and clients would be judging the effectiveness of the new organization.  We had to address the needs of each audience and provide tangible proof to convince them that the new entity would be a desirable place for all.
This was not going to be easy.  We had to deal with the sensitivities of four different companies, each with its own way of doing things.  In addition, we wanted the announcement to be seamless, which meant informing all 10 offices of the combined of the new company in a consistent, simultaneous fashion.
In addition, we had to create this new entity.  We needed to get the principals of four companies to agree upon a new name and identity.  We had to get as many of the systems as possible in place in order to make the transition as smooth as possible.
Finally, we had to integrate all four agencies together and retain our culture.  Naturally, this takes time.  But the immediate challenge was to put the three New York offices – the bulk of our new staff – under one roof and make them feel welcome.
Our in-house research team had conducted employee surveys at two of the four firms – ACG and CDB.  This provided us valuable information on the attitudes and expectations of the employees at each of the two agencies.  Given the sensitivities of the acquisition targets, we opted not to survey those employees so as not arouse any suspicions.  Instead, we relied on the information provided by their principals to determine the current mindset and disposition of their respective staffs.
Armed with this insight, we crafted a communications plan for Project Blue (see Attachment #1).  In a nutshell, our goal was to make the M&A proceed smoothly, with employee retention clearly the primary focus.  Our objectives, as stated in the plan, were as follows:
  • Protect our collective Core Ideology (see Attachment #2)
  • Integrate cultures, nurturing the best of each
  • Retain and integrate talent, fostering happiness and a sense of belonging
  • Retain client relationships and quality of service
  • Position as enhanced, integrated agency to combined trade and vertical market media
As we moved forward, the Project Blue plan became a working document – not only for our communications but also for the deal itself.  We planned out every detail, updating it regularly and circulating it to all the key players.  Meeting in person was not always practical, so we relied heavily on email to facilitate communications.
The need for confidentiality also played a role as we planned the launch event.  Fortunately, we were able to tap expertise at ACG to handle this, as it is their specialty, simply by treating the project as a confidential client.  And we also had to work behind the scenes to find a new flagship office that would accommodate everyone in New York.
To achieve our objectives of maintaining our culture and focus during the transition with minimal turnover among the staff, we adopted a strategy that would address all facets of this challenge.  As stated in the Project Blue plan, our strategy was as follows:
  • Educate staff about ideology and cultures, and reinforce them
  • Identify and leverage best practices from each organization
  • Leverage acquisition as platform for repositioning combined firms
  • Strengthen network of offices
The breadth of tactics is described in detail in the Project Blue Plan.  One key aspect of our execution was the overriding need to take care of our people first.  Our employees had to hear the news of the M&A deal directly from us.  Not only is this reflective of our culture and core values, but it also demonstrates the integrity of our leadership and our ongoing commitment to maintaining these values.
Several other industry M&A announcements that year were reported in the trade press before the company had a chance to share the news with their employees.  To ensure that this didn’t happen with our deal, we moved with great speed to reach all of our employees.
We selected a name for the new entity – Magnet Communications – in a democratic way, which helped set the tone for the new firm by reflecting the culture we sought to maintain.  We also selected June 19 as the day to tell the employees, and June 20 to announce it to the rest of the industry via the trade publications.
We crafted internal presentations to announce the formation of Magnet to the employees of each of the four agencies.  These presentations were delivered by top-level executives – Darryl Salerno, chairman & CEO; David Kratz, president/Public Relations division; and Pennie Wilfong, president/Meetings & Events division – to every office of all three firms.  We began in New York – delivering key messages while addressing specific questions and concerns – and moved West across the time zones until we had presented the new entity to every employee.  That night, we held a launch party in New York to give us a chance to get to know each other and celebrate the formation of Magnet.
The following day, after announcing the formation of Magnet to the external world via a press release, the senior management embarked upon a cross-country tour to personally meet every single employee in the company within a week.  The purpose of this was to personalize our new management team, reinforce the messages delivered in the presentation, and interact with the staff to gather information and address concerns.  During this tour, we held individual launch parties in each region.  This gave us an opportunity to bring together the staff from every office in the region, so they could meet each other and establish relationships.
We also used these launch parties as a forum to let our employees select a logo for the new agency.  They were presented with three options and asked to vote on which they preferred.  This democratic approach helped demonstrate the kind of place Magnet was going to be – again, reflective of the culture and values we sought to maintain.
To maintain an open line of communication with our employees, we launched a weekly internal newsletter called MagMag.  Distributed to all staff via email, the newsletter was instrumental in communicating news to all the offices as we moved forward.
For our New York flagship office, we selected 45,000 sq. ft. in the fashionable Chelsea Market complex.  We custom-built a space that reflects the culture – open and fun yet effective and rewarding.
If you review our stated objectives, the primary goal of Project Blue can best be summarized as employee retention.  With that in mind, the launch was clearly a success.  Voluntary turnover was less than five percent in the critical first four months following the formation of Magnet.  In addition, we did not lose a single client as a result of the announcement.  In fact, we added 22 new clients in those four months – many resulting from the expanded capabilities now offered by the new entity.
One of our goals was also to use the launch to position Magnet within the industry.  Coverage in the industry trades was the most expedient way to achieve this, and particularly efficient because our employees rely heavily on industry trades for news and information.  The launch of Magnet was prominently featured in all the major trades, and the coverage was extremely positive.  Copies of some of the articles are attached.
Our weekly employee newsletter is still providing timely information to our staff.  Nearing its 30th issue, it remains a key tool for reinforcing our culture.
Our flagship office has also proven a tremendous success.  It helps us maintain our culture while serving as a source of pride.  One award-winning television show has already filmed there, and a feature film and leading fashion magazine are currently considering it.
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