Paul Holmes 17 Jun 2001 // 11:00PM GMT
Recently, the global communications department at the Readers Digest Association was charged with developing and executing a U.S. public relations plan for the company’s flagship title, Reader’s Digest magazine. Says vice president of global communications Elizabeth Broad, “This particular public relations plan required an agency to bring creativity, daily interaction and a solid working knowledge of the magazine industry.”
Broad considered a wide range of options, from a giant, multi-office agency to a smaller boutique. “Often times the thought is ‘bigger is better,’” she says. “But in this case we chose to go with a small agency. Appointing a small agency allowed more senior, more experienced public relations specialists to work on the account. And, our needs demanded a hands-on approach and grass roots effort.”
That’s not to say that there aren’t times when Reader’s Digest might prefer to draw on the resources of a larger agency.
“Large agencies are an excellent route to take if you lack the knowledge or expertise of a certain market where your PR efforts need to be directed,” says Broad. “If you are rolling out a global initiative you would want to sign on with an agency that is known worldwide and understands the different markets and cultures. Not only can that agency educate you on the markets, but they usually have the capabilities to roll out your plan locally being that they have offices located around the world.
“Of course, the downside to using larger sized agencies is the lack of personalized attention.”
To a certain extent, Broad’s comments represent the consensus view of clients—even clients at large, multinational corporations—when it comes to questions of agency size. There are times, clearly, when only a global full-service agency will do, when a client needs international reach and cross-functional expertise. But in other circumstances, many clients continue to believe they can get something—greater creativity, better client service—from a smaller firm.
It’s interesting, particularly at this point in time, that there is so little enthusiasm among clients for bigness. Interesting because the year 2000 saw four PR firms—Fleishman-Hillard, Weber Shandwick, Hill & Knowlton and Burson-Marsteller—break through the $300 million barrier for the first time, and because Weber Shandwick could soon, if a proposed merger with BSMG Worldwide goes ahead, become the world’s first $500 million PR agency.
Clients may not believe that bigger is automatically better, but one gets the sense that agencies—and their holding companies—do. At least three of the four $300 million firms got that way largely through acquisitions, and the fourth, Burson-Marsteller, was sufficiently alarmed at being knocked off the top spot that it distributed a memo to its employees explaining why, according to generally accepted accounting principles, it was still really number one.
These agencies claim that getting bigger is not an end in itself, but rather a means to be able to support increasingly global, increasingly complex client needs. Not every assignment requires their vast resources, but the most challenging—and most rewarding—programs involve multiple geographies and multiple practice areas.
That’s the rationalization, but some clients clearly believe ego—or the growth targets imposed by large, publicly traded parent companies—is involved.
“I think there is too much emphasis on being the ‘biggest,’” says Valerie di Maria, who heads corporate communications at GE Capital—and previously headed the New York office of GCI Group. “As a client, I don’t care what the agency’s revenues are—if it’s number one or number 11—as long as the team is the right fit. And regardless of how many offices an agency has, it still seems to be a challenge for all the offices to work together seamlessly.”
Ron Culp, vice president of public relations and communications at Sears Roebuck, goes even further in his scorn for the “bigger is better” philosophy.
“Heaven help us,” he says. “Perhaps some huge multinational corporations will employ the half-billion-dollar mega-agency, but I don’t anticipate relying on such a firm. The alarming bottom-line orientation of agency-devouring conglomerates will continue to drive more and more of us to quality small to midsize agencies. While some mega-agencies can successfully grow through acquisitions, I fear that financial constraints will soon set in. Ultimately, the holding company’s CFO can be expected to apply bottom-line handcuffs that restrain outstanding customer service.”
Over the past five years, Culp says, his company has quadrupled its spending with small and midsize agencies, while its spending with larger agencies has decreased. “We continue to work with several of the top 10 agencies, who do a fine job for us,” says Culp. “But my staff basically feels that the smaller agencies deliver greater value and creativity.”
But most clients appear to take a more middle-of-the-road approach, conceding that there are times when big agencies are needed.
GE Capital has used both large agencies and boutiques. Says di Maria, “Big is important for international reach—having offices in our most important markets—as well as having the right talent. We have also used boutique agencies on assignments, with some success.”
“We have been giving this issue a lot of thought recently,” says Steve Harris, vice president of communications at General Motors Corporation. “Obviously, it depends on the size and global footprint of your own organization, but in our case we think a combination of one, two or three large, global agencies supplemented by smaller—and in some cases, regional and specialized agencies—will continue to make the most sense.”
Gene Grabowski, vice president of communications for the Grocery Manufacturers Association, agrees. “Bigger is always better when you need contacts around the world,” he says. “When the U.S. Treasury, for example, launched its new series of paper currency, beginning with the $100 bill, only a large agency such as Burson-Marsteller, with its global reach, would do because of the scope and international nature of the assignment.”
In the corporate world, however, even global assignments require local execution, and sensitivity to local concerns. In a decentralized corporation, local management is likely to demand—or at least expect—input into agency hiring decisions, and in many cases will prefer to use a strong, indigenous firm over a giant multinational imposed by the U.S. headquarters.
“Wherever we have a significant communications presence outside the U.S., in Europe and to a large extent in Asia, our people would prefer local or regional agencies that are completely in tune with local media and culture, issues,” says Harris. “Sometimes, this can be accomplished by an in-country office of a global firm, but not always.”
Bill Curry, director of public relations at Amazon.com, says simply, “There is no best; there is only what works.” And what has worked for Amazon includes one large international agency, Golin/Harris, which provides the online bookstore with access to multiple locations, rich resources, and a breadth of expertise; several small boutiques with specialized expertise in critical market categories; and a one-person consultancy with “superior knowledge in a relatively narrow category.
“We’ve been thrilled with all,” says Curry. “We’ve gotten the benefits of a large, multi-talented, multi-office agency, such as when we closed a distribution center in Atlanta—we’re based in Seattle—and when we launched our kitchen store and used an expert on ‘foodie’ PR.”
What’s interesting is the extent to which these clients believe there’s a trade-off involved: that going with a larger agency means either paying or more receiving less in terms of client service and personal attention.
Says Grabowski, who worked for Burson-Marsteller before joining the GMA, “You pay for that global reach, both because of the attendant high overhead of maintaining offices around the world and because larger, more reputable agencies tend to have higher-priced talent aboard.”
“I don’t see an inherent advantage either way in big versus small,” says Curry. “A local or regional consumer products company could be happy with a local consumer focused agency. But then what happens when there’s a nationally publicized product recall? Conversely, why incur the overhead costs of a mega agency when you don't need all of their resources?”
Budget is clearly a serious consideration, even for clients that spend millions on PR.
“I prefer a surgical approach to using PR agencies,” says Don Spetner, who recently joined Korn/Ferry as head of communications. Spetner has worked at several large PR firms, and worked with them in the past when he headed PR at Nissan. But now, he says, “We hire smaller boutiques for very specific projects and needs.
“At Nissan I absolutely needed a huge agency with multiple offices—our agency budget at the time exceeded $3 million in fees and we needed lots of support with a wide array of skills—sports marketing, consumer marketing—and in a variety of locations. But my feeling is that if your budget is constrained, you are better off with boutiques.”
Midsize clients should be especially wary of large agencies, some clients say, because large agencies are by definition more focused on their largest clients.
“There is also the age-old problem of the big firms catering to their bigger clients,” says Grabowski. “No matter how much anyone protests that this isn’t true, it is the case. The larger a firm is, the less likely it is to desire a small or even mid-sized enterprise as a client. In my experience, client-agency relationships work out best when a company seeks the services of an agency of a comparable size to itself and with professionals on staff whose personalities and skills best match the client’s.”
But it’s not just about budget. Many clients believe that smaller firms are more creative, and more devoted to client service.
Says Grabowski, “When the job calls for a specific skill, such as media placement or writing, a client is often better off hiring a smaller, hungrier firm, staffed with young professionals on the rise, or skilled senior professionals who might not be as ambitious or eager to travel as the PR professionals who tend to gravitate to larger firms. Writing talent, like strong major league pitching, is a scarce commodity
today. I have found, on average, better writing talent at smaller and mid-sized agencies that place a higher premium on a job well done than on ‘growing the business.’”
Another senior corporate PR executive sums it up succinctly: “Both small and large agencies have pros and cons. Before choosing, you need to evaluate the task at hand and determine the results you would like. You need to decide whether you want individual special attention that a small agency can provide or the broad knowledge and vast reach a large agency can deliver.”
Having said that, there are some clients (particularly those with agency experience) who believe it is possible to receive great service, and top-notch creativity, from even the largest agency.
“I think the myth here is that you’ll get more attention in a smaller shop,” says GE Capital’s di Maria. “But so often they are chasing the next new piece of business that their senior talent is easily diverted. If agencies—both big and small—invested some of their time on high potential current clients, they’d do better growing their revenues then putting so much of their resources on the next new piece of business.”
“A global corporation with a wide range of support needs can indeed be best served by a large global agency,” says Frank Pollare, director of public information from Computer Sciences Corporation. Pollare’s experience spans boutique PR firms—he was head of his own Los Angeles-based agency for a while, and large agencies. “Creativity is not the exclusive domain of boutique shops; I believe there are offices of multi-national firms that are just as creative as a boutique.”
Of course, the clients we spoke with are all sophisticated and knowledgeable consumers of public relations services. It may be that brand managers and marketing executives, less immersed in the world of public relations, see size as a security blanket. They are going to feel a lot more comfortable going with a Fleishman-Hillard or a Burson-Marsteller than with a boutique firm that no one on their management team has ever heard of.
The numbers suggest that there are clients out there—at least $1 billion worth of clients—who do want a mega-agency with $300 million in revenues, and the top tier agencies are betting that the number of such clients is only going to increase.