Vaishnavi’s Fall Offers Wake-Up Call For Indian PR Industry
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Vaishnavi’s Fall Offers Wake-Up Call For Indian PR Industry

Few firms have demised as dramatically as Vaishnavi Corporate Communications.

Arun Sudhaman

Few firms have demised as dramatically as Vaishnavi Corporate Communications. Until it ceased trading earlier this month, it was the undisputed heavyweight in the Indian public relations market, the largest firm with the most famous clients. And its downfall could prove a pivotal event amid the rapid maturation of a public relations industry that has grown in fits and starts in the two decades since the country’s economy was liberalised.

The industry angle will provide little solace for Vaishnavi’s 200-odd employees, even if around 30 are to be absorbed into former client Reliance’s in-house comms team. For staffers, Vaishnavi’s decline was brutally rapid, although a steady trickle of clients had been departing the firm for the past 12 months, ever since the leak of phone transcripts engulfed founder Niira Radia - and key client Tata Group - in India’s 2G telecoms lobbying scandal.

Competition among Indian firms is ferocious, even by the cut-throat standards of the global PR sector. So there are few peers lamenting the end of Vaishnavi’s stellar decade-long run, particularly given the distance Radia kept from other industry seniors. Amid the schadenfraude, however, a more subtle factor is at play. Could this watershed event finally help end the characterisation of PR types as nothing but spinners, fixers and image polishers?

The early returns suggest not. The country’s mainstream media has revelled in using ‘Radiagate’ to paint a picture of an industry that is probably feckless and possibly corrupt. Among agency heads, the answer is more qualified. Vaishnavi’s predicament made it painfully clear that Radia’s brand of corporate lobbying is becoming a relic of a different era. One agency head calls it a “cleansing of the system.” Yet there remains considerable concern that the Vaishnavi shutdown simply confirms everyone’s worst fears about the PR profession.

“There is a chance that this will demonstrate that there is alternative version of public relations,” says one senior agency source. “Just a chance.”

Madan Bahal, founder and CEO at Adfactors, now India’s biggest PR firm, points out the situation must be seen as a positive for the industry. Many observers have noted the folly in one client, be it Tata or Reliance, concentrating so much power in one person. The irony is that the very model that enabled Radia to thrive eventually proved her undoing. Once she became linked to the unfolding scandal, her firm suffered by proxy, and relationships with influencers became irreparably damaged - a fatal threat for any public relations firm.

“But it’s bad for the firm’s stakeholders - the employees and clients,” adds Bahal, and he is not wrong. One week before Vaishnavi’s contract with Tata expired, the firm paid out Diwali bonuses. That does not look like the actions of an agency in its last days of existence. Sure enough, when the shutdown was announced seven days later - on a Sunday no less - it was as much a shock to Vaishnavi’s rank and file as it was to the industry at large.

“It was a surprise,” says one ex-Vaishnavi executive. “We were expecting some changes, but not the closure.”

All criticism of Radia, furthermore, must be tempered by the observation that the firm she built was no slouch, particularly where staff talent was concerned. Many of its ex-employees will no doubt join Edelman, which now finds itself having to staff up in a hurry. “At the end of the day, the quality of the professionals at Vaishnavi were at a different level,” claims the ex-Vaishnavi source. “I just pray and hope that other agencies also have high and exacting standards.”

The addition of the Tata Group account, encompassing all of the giant conglomerate’s 100-plus companies, is undoubtedly a coup for the US firm and for CEO Robert Holdheim, who took over a flagging operation in early 2009. But anyone who sees it as a straightforward win should think again. Edelman is expected to reap of windfall of more than $8m from the new account, which while a fair amount less than Radia’s retainer, will still effectively double its size - the kind of development that can put plenty of strain on even the most committed of agency cultures.

That Edelman secured the business at all, in conjunction with Arun Nanda’s Rediffusion ad agency, has set plenty of tongues wagging. Not least because Nanda’s firm is 26.7 percent owned by WPP, which has long sought to increase its shareholding, to no avail. To help handle the sizeable mandate, Nanda is understood to have first approached Penn Schoen Berland (PSB), the Burson-Marsteller research firm that is headed by former Genesis B-M CEO Ashwani Singla.

For whatever reason, and no one involved will comment on the record, the PSB initiative proved fruitless. With WPP out of the frame, an independent firm became the likeliest option and both Holdheim and Asia-Pacific CEO David Brain’s status as relative outsiders may have helped Edelman clinch the deal. Unsurprisingly, the PR firm believes the new business will eventually cement relationships with Tata across the world; at present the arrangement covers India alone.

As for Tata, an organization that prides itself on its sense of social responsibility, it is unlikely that any reputational fallout from the affair will be taken lightly. The hope, perhaps, is that India's PR industry is similarly attuned to the importance of building a transparent and trusted brand for itself.

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