Now in the fifth year of the Howard Paster-Tom Hoog management era, Hill & Knowlton is officially back as a force to be reckoned with. The firm recorded organic growth of 40 percent in the U.S. in 2000, and a couple of minor acquisitions—The Rockey Group in Seattle and technology specialist SocketPR in Atlanta—should push that number a little higher. The growth has come from new business wins including Ernst & Young, Allstate, Sharper Image, and e-Stamp and from existing clients such as Motorola (which consolidated its global PR business with H&K) and Compaq.
The agency is probably strongest now in California, with the L.A. office handling major assignments ranging from Mazda and Motorola to the California Department of Health Services teen pregnancy program, the Sacramento office expanding its public affairs capabilities, and Blanc & Otus up close to 50 percent in San Francisco. The Washington office, meanwhile, offers both public affairs and marketing communications capabilities, with public affairs assignments including work for the beleaguered music and motion picture industries and with the marketing communications group picking up new business from the U.S. Mint and the Aluminum Association. New York, once the flagship, has slipped somewhat—in part because of the high turnover at the general manager level—but Phil Sheldon, who joined from Porter Novelli, has been a steadying influence and the consumer and healthcare practices are back on track. In Atlanta, two acquisitions—marketing boutique Hype and Socket—have really put the agency on the map, while the Houston office now has fees of around $8 million, dominated by the Compaq account and several major energy clients. Finally, Chicago continued its comeback. By 1998, revenues had fallen to $6 million and H&K was no longer in the top five in the market. The firm will end 2000 with fees back at the $10 million level, thanks to new business in the IR and tech practices.
Hill & Knowlton’s overseas operations did not suffer the same indignities that were visited during the 90s on the brand in the U.S., and the agency is regarded as the market leader—in terms of quality if not volume—in the U.K., and one of the top two or three in most major markets across Europe, where regional president Paul Taaffe has done an impressive job. The Asian operations have been strong contributors too. And H&K has been aggressive in Latin America too, rounding out what may be the most impressive international operation of any top-tier agency.
Under Harlan Teller’s leadership, the corporate practice at Hill & Knowlton has re-established itself as one of the two or three best in the business, with major programs from Motorola and Navistar, among others. H&K is one of the first firms that organizations turn to when crisis strikes, as indicated by the firm’s ongoing work for the International Olympic Committee in the wake of the Salt Lake City scandal, and its role in the Egypt Air and Gulf Air disasters. The employee communications practice, meanwhile, has benefited from the U.S. launch of WPP’s Banner McBride, which operates here as a unit of H&K focused on internal audiences and generated $7 million in fees in 2000. Another area of leadership is litigation support, strengthened this year via partnerships with Dispute Dynamics, a trial communications firm, and Employment Law Training, which provides training on harassment and other workplace problems. Since the acquisition of Blanc & Otus, H&K has been a force to be reckoned with in technology, and the U.S. practice today has revenues of $50 million, supplemented this year by the acquisition of Socket. Clients range from major telecommunications players such as British Telecom to the more entrepreneurial business-to-business clients of Socket. The tech practice is also liaising with the investor relations group, which handled tech IPOs such as Buy.com last year and handles ongoing IR for clients such as Verizon and E-trade. The consumer group is showing signs of strength also, handling programs for several of Procter & Gamble’s homecare brands, and food clients such as Best Foods. The travel and tourism group, in particular, has been on a roll, up 70 percent thanks to clients such as Celebrity Cruises and the Puerto Rico tourism account. Sports marketing is another strength. The departure of healthcare practice leader Shellie Winkler was a blow, but the group has been expanding the scope of its activities, supplementing its pharmaceutical work with more corporate branding assignments, some merger and acquisition support work, and change management projects for clients such as Aventis.
Staff turnover at Hill & Knowlton is way down—below 20 percent agency-wide—but in recent years some key appointments at the senior level have not stuck around as long as Paster and Hoog would have liked, with the problem particularly acute in New York. For that reason, probably the most significant new hire was Phil Sheldon, head of healthcare at Porter Novelli New York, who was named general manager of the New York office. With Jim Cox returning to head the New York corporate practice as well as agency-wide business development, the flagship office is in better shape than it has been in some time. Also joining are Ernie Sando (late of Georgeson) to head investor relations; Sally Gaines and Pat Wechsler (former Business Week reporter) in the media relations group; and Derwin Johnson as manager of the media training group. Departures included IR practice leader Jeff Zilka, who joined a dot-com client; Sarah Peterson, GM in Houston, who also switched to the client side; and healthcare exec Don Hyman.
Hill & Knowlton has been rebuilding its culture over the past couple of years, emphasizing values and investing heavily in professional development, and it is beginning to pay off inside the company, with high marks on employee surveys and a much-reduced turnover rate. H&K has also emerged as one of the best places in the business for minorities—with more ethnic minorities represented in senior management and the most gay and lesbian-friendly workplace among the major agencies. But it needs to tell its story more effectively in the outside world.
At first, the agency’s new service initiatives in Washington—including an on-budget guarantee and results-based contracts—don’t sound particularly dramatic, but in a competitive market such as the nation’s capital, where beating out another agency is often a game of inches, H&K’s willingness to guarantee its budget has been a help, and the results-based contracts have helped the agency become more of a partner with its clients. Meanwhile, the firm’s creation of several “asset groups” focused on niche markets from litigation to gay and lesbian marketing to strategic philanthropy are establishing its leadership credentials in some interesting growth markets.
Hill & Knowlton’s work for Motorola shows the kind of critical communications counsel the agency can provide. H&K is advising the company’s leadership on its “one Motorola” strategy, helping to create a technology leadership positioning, and developing a global social responsibility program. The L.A. office of Hill & Knowlton, meanwhile, was selected to coordinate PR for the Democratic convention, facilitating meetings between the Democratic National Convention and the host committee, and continues to handle some major social marketing programs (teen pregnancy, responsible parenting) for the state. The agency also handled employee communications for clients such as Allstate, Motorola, and Novartis, and crises for Gulf Air and the International Olympic Committee.
The Hill & Knowlton brand, severely tarnished in the early 90s, has finally been restored to its former glory. It may not be the undisputed industry leader it once was—others have caught up—but it has earned the respect of peers (H&K is no longer an agency they enjoy pitching against) and of clients. The firm has also invested in the Blanc & Otus brand, which is among the leaders in the technology arena.
The arrival of Paul Taaffe, the dynamic young president of Europe, in New York sent a clear signal about Howard Paster’s succession plans. Taaffe is one of those rare individuals who can command the respect of clients and the affection of those who work for him, and no one within the agency doubts his ability to build on the strong foundation laid by the current management team. His international credentials—he’s an Australian who has worked in Europe—bode well for the continued success of H&K’s global operations. A bigger question mark concerns the U.S., where the identity of Tom Hoog’s eventual successor is much less certain.