Paul Holmes 16 Jan 2011 // 12:00AM GMT
Six months ago, I sat down for lunch with Paul Taaffe, then global chief executive of Hill & Knowlton. He was unhappy, because Hill & Knowlton had been passed over for our Global Agency of the Year award, and in an effort to persuade me that the firm deserved consideration for that recognition, he asked to me to identify the two or three best firms in the 10 most important public relations markets around the world.
H&K was at least a contender for the shortlist in nine of those 10 markets. Unfortunately, the market in which the firm was not even a plausible top three player was the United States, which in any sensible scoring system is going to account for somewhere between a third and a half of an agency’s overall rating. It is H&K’s decline in the world’s largest public relations market that cost H&K a shot at Global Agency of the Year. It may also have cost Taaffe his job.
Certainly, when Taaffe and Marylee Sachs—both of whom have departed Hill & Knowlton in the first couple of weeks of the New Year—transferred from the U.K. to the U.S., bringing with them an impressive track record of success in Hill & Knowlton’s European operations, it was with the hope that they could duplicate that success in the States.
Hill & Knowlton had never fully recovered from the damage to its culture and its reputation inflicted a decade earlier under the leadership of Robert Dilenschneider, despite the efforts of a succession of senior leaders—including Howard Paster and Tom Hoog. They restored the agency’s integrity and its credibility, but they had not quite been able to return it to its position as a powerhouse player in key markets such as New York and Washington, the go-to firm for companies facing critical communications issues.
Neither, despite some successes, were Taaffe and Sachs. Which is perhaps why, in November of last year, WPP decided to merge Hill & Knowlton with sister agency Public Strategies (PSI). Public Strategies lacked the global footprint of its larger sibling, but it brought key assets to the party: strength in Washington, D.C., where H&K—once a powerhouse—was a shadow of its former self; a blue-chip client list that includes names such as AT&T and Target; a focus on strategic counsel at the C-level—in the public policy arena and beyond; and perhaps most important, a strong senior management team with impressive political and corporate experience and the credibility to hold their own in a room of accountants, attorneys and management consultants.
In this, WPP’s thinking—as my colleague Arun Sudhaman pointed out in a blog post shortly after last week’s news—may have been influenced by the impressive success of Mark Penn (another respected senior counselor with a background in the political realm) in reenergizing H&K sister agency Burson-Marsteller.
In any event, with hindsight it is possible to say that the writing was on the wall for the incumbent management team when the merger took place and PSI founder Jack Martin was named global executive chairman (the “executive” part indicating that this was not going to be a figurehead role) and PSI’s Dan Bartlett—a veteran of the Bush White House—was named president and CEO of the U.S.
That Martin would take such an active role came as a surprise to some advisors, since he had stepped back from day-to-day management at PSI after its acquisition by WPP.
“It was a debate I was having with myself over the last year or so at PSI,” Martin says. “I could have stayed at PSI in a senior role, although Dan had taken over the running of the firm. But I decided I was ready for a new challenge. What was missing at PSI was the opportunity to take our unique business model global. We never had a global platform for that. The merger presented me with an opportunity to take my beliefs about the business and implement them on a global scale.”
The degree to which he intends to be a hands-on chairman is clear from the miles he has put in already. He has visited H&K operations in Singapore and Delhi, London (where he met with the heads of the most of the EMEA offices), the Middle East, and Canada. This week he will be attending an EMEA management meeting in Athens.
“I believe Hill & Knowlton is a really great brand,” he says, acknowledging that he was impressed with the overseas operations. “But we need to grow, and particularly we need to expand in the U.S.” When I suggest that Hill & Knowlton is still a great brand, but no longer a great agency, Martin doesn’t say he agrees, but he does concede that the firm has some weaknesses that need to be addressed.
“I have spent 22 years selling against the big, full-service agencies. Part of my selling proposition was that we had fresh ideas, fresh thinking. I think the business as a whole needs to take a fresh look at our offer and to make sure we understand what clients need from us in the 21st century. Does that apply to Hill & Knowlton as well? Absolutely.”
Martin has a perspective on the role of public relations that has been articulated through an approach PSI calls Fifth Seat. When faced with significant strategic decisions, the firm says, companies traditionally turn to four advisors: legal counsel, investment bankers, management consultants and forensic accountants. The public relations firm should fill a fifth seat, focused on public trust, helping turn corporate reputation into competitive advantage.
But the first priority has to be an upgrade of the U.S. operations. The addition of Public Strategies almost doubled the agency’s revenues in its headquarters country (in terms of fee income, PSI was about 80 percent as big as H&K; in terms of headcount, it is considerably smaller—a reflection of its focus on high-stakes, high-margin consulting) and gave it critical mass in two critical markets: Washington, D.C. and Texas (the state is home to the second highest number of Fortune 500 companies in North America). Going forward, H&K will need to expand in Chicago and California (particularly in San Francisco) and especially in New York, where it is undersized compared to most of its peers.
The merger also made H&K a formidable force in public affairs and corporate strategy (the idea that PSI is just a public policy powerhouse is outdated; the firm has expanded to offer a broad range of C-suite counseling services), but Martin acknowledges the need to strengthen capabilities in other key areas: consumer marketing, healthcare, technology and digital.
The latter specialty was addressed this week with the addition of Andrew Bleeker as global digital practice director, reporting to Martin. Bleeker was principal and founder of Bully Pulpit Interactive, a digital communications firm founded by veterans of the Obama digital team. That appointment signaled Martin’s willingness to look outside the PR industry for talent; he is critical of the industry’s tendency to cannibalize other firms for new hires.
The focus on digital is no surprise. In many ways, political campaigns have been the most sophisticated users of new media, and Martin believes many of the lessons learned in that environment can be applied in the corporate realm. Perhaps more surprising is the new chairman’s focus on the consumer realm, which is not what his firm is known for.
“We are going to take a fresh look at the consumer business, at the marketing communications business, and pull together the people working on that around the world to learn best practices,” Martin says, making it clear that he sees an opportunity for significant growth in the consumer space. “If we have to recruit fresh talent to strengthen our offer, we are going to do that.”
Another priority (and another point of similarity with the transition Penn has overseen at Burson) is research. Peter Zandan, former CEO and chairman of IntelliQuest and a senior advisor to PSI, will be driving H&K’s research capabilities. Says Martin: “If you aspire to the Fifth Seat, you need to have a world class capability to measure public opinion and understand public opinion.”
With so much change in the offing, however, perhaps the biggest challenge—at least through the first few months—will involve the internal audience at H&K. That’s one reason the appointment of Ken Luce, former president of global client management at Weber Shandwick, looks like a smart move. Luce was involved in the merger of BSMG, The Weber Group and Shandwick—perhaps the most successful big agency marriage of the past 20 years.
Luce also brings global client management experience—although he is quick to point out that Martin, Bartlett and others at PSI have plenty of experience counseling blue-chip clients on global issues at the board level, even if the firm did not have the arms and legs on the ground in overseas markets to handle implementation.
He is confident that Hill & Knowlton’s people will react positively to the changes that are planned, and that the firm will have no difficulty attracting new talent to supplement its existing capabilities. Who wouldn’t want to be part of restoring one of the world’s great public relations brands to its former glory? Who wouldn’t want to be part of the PR management challenge of the decade?